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Social Security: 3 Strategies That Can Protect Your Retirement if Benefits Are Cut

By Katie Brockman – Aug 27, 2020 at 8:02AM

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Benefits could be cut in the relatively near future, so now is the time to act.

Social Security benefits can have a significant effect on your retirement, depending on how much you have saved in your retirement fund. In fact, nearly a quarter of married couples and close to half of unmarried beneficiaries depend on their monthly checks for at least 90% of their retirement income, according to the Social Security Administration (SSA).

However, there's a chance benefits could be reduced or even eliminated in the relatively near future, which could be disastrous for millions of retirees.

The SSA relies primarily on payroll taxes to fund benefits. But with so many older adults retiring and living longer lifespans, the money coming in from payroll taxes is no longer enough to pay out benefits in full. To bridge the gap, the SSA has been pulling money from its trust funds, but those funds are expected to be depleted by 2034 -- at which point payroll taxes will only be enough to cover around 76% of projected benefits.

Social Security card with assorted bills

Image source: Getty Images.

Additionally, President Trump has proposed payroll tax cuts, going so far as to suggest eliminating payroll taxes altogether. If payroll taxes are reduced, that could result in the SSA taking even more from its trust funds right now, and benefits could be cut sooner than 2034. And if payroll taxes are eliminated completely, that could devastate the Social Security program unless Congress comes up with an alternate source of funding.

Because so many older Americans depend on Social Security to make ends meet, it's unlikely Congress will eliminate the program altogether. That said, anything can happen, and it's better to be safe than sorry. There are a few moves you can make to maximize your monthly checks just in case benefits are reduced. 

1. Make sure you've worked at least 35 years before claiming

You only need to have worked and paid taxes for at least 10 years in order to be eligible for Social Security benefits, but if you've worked fewer than 35 years, you could receive smaller checks.

To calculate your benefit amount, the SSA takes an average of your income over the 35 highest-earning years of your career, then adjusts it for inflation. If you haven't worked a full 35 years, you'll have zeroes added to the equation to account for the time you weren't working. That will bring down your earnings average, which will also result in less money in benefits.

2. Delay claiming benefits

Even if you have worked at least 35 years, there are still ways to further increase your benefits. One thing you can do to potentially boost your benefits by hundreds of dollars per month is to delay claiming them.

You can begin claiming benefits as early as age 62, but the longer you wait to begin claiming -- up to age 70 -- the more you'll receive each month. If benefits are reduced in the future, those bigger checks can go a long way toward affording a comfortable retirement.

Say, for instance, you have a full retirement age of 67 years old and would receive $1,500 per month by claiming at that age. If you were to claim at age 62, your checks would be reduced by 30%, and you'd receive just $1,050 per month. Wait until age 70 to claim, though, and you'd receive an additional 24% per month on top of your full benefit amount, or $1,860. That's a lot of extra cash each month, which can help significantly if benefits are cut.

3. Consider picking up a side hustle to boost your income

Because your benefit amount is based on your average income over 35 years, the more you're earning each year, the higher your average will be -- and the more you'll collect in benefits each month.

By picking up a side hustle, you can boost your income and your benefit amount. You don't have to spend 35 years working a side hustle to see a difference, either. Increasing your income for even a year or two will bring up your average when the SSA looks at your earnings over your career, and a higher earnings average will result in bigger checks each month.

The future of Social Security is uncertain, and it's wise to be prepared for anything just in case benefits are reduced. By taking these steps, you can boost your benefits each month to take the sting out of any potential cuts.

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