The majority of Americans are worried Social Security won't be there to provide benefits in the future. And while the program can't run out of money, there is reason to fear benefit cuts in the next 15 years, as the program's trust fund is expected to run dry in 2035. 

But while you were busy worrying about what will happen in the future you may have missed the fact a major cut to benefits has effectively already happened. And, sadly, things are likely going to get worse. 

Older man grabbing piggy bank away from outstretched hands.

Image source: Getty Images.

How have Social Security benefits effectively been cut already?

Social Security benefits are supposed to provide seniors with a secure, inflation-protected source of income. In, fact, cost of living adjustments (COLAs) are built right into the program to provide periodic benefit increases.

Unfortunately, those COLAs haven't been doing their job, so the value of Social Security benefits has been steadily declining. From January 2000 to January 2020, their buying power has fallen by around 30%. So, even though no laws have been passed to change the program in that time, seniors today effectively get a far lower benefit than their counterparts did a decade or two ago. 

The big problem is that the amount of the COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) instead of based on a consumer price index that tracks rising prices for elderly Americans. And CPI-W has resulted in COLAs that have increased benefits by 53% since 2000 while costs for goods and services elderly retirees depend on have risen by 99.3% during that time. 

This problem won't go away unless or until lawmakers change how COLAs are calculated, so the value of benefits will continue to fall each year as seniors get too small of a raise. And, since the coronavirus may result in a low COLA this year (or a nonexistent one), seniors could see their buying power fall even more. 

While Democratic presidential nominee Joe Biden has proposed changing how Social Security raises are calculated, there's no guarantee he'd be able to get legislation passed to do that, even if he's elected. Instead, with Social Security already in financial trouble, the chances are higher that some type of benefit cut will happen over the next decade -- beyond the de facto cuts that have already occurred due to falling buying power.

In other words, things are bad now due to inflation eating away at the value of your benefits -- but they could get much worse if the trust fund runs out of money -- which would necessitate an automatic 24% benefit cut -- or if lawmakers reduce benefits in a bid to prevent that from happening.  

What can you do as a retiree?

As a retiree, there's not much you can do to stop the erosion in the value of your benefits, an automatic benefit cut, or damaging legislative changes -- other than making this a voting issue and contacting your representatives.

What you can do is make sure you're in good financial shape even if the value of your benefits keeps falling and even if bigger cuts happen in the future. And the best way to do that is to spend conservatively now while making sure your retirement money is invested appropriately. 

If you can keep your spending down, you can leave more of your retirement money invested for later in case you need to depend on your savings more as Social Security benefits buy less. And by making sure an appropriate percentage of your retirement portfolio is invested in the stock market, you can maximize your potential returns while minimizing the risk of outsized losses in case of a market crash. 

Now is the time to take these steps -- Social Security "cuts" will keep happening as buying power continues eroding, even as the day of reckoning for Social Security's trust fund draws ever closer.