Each year, the Social Security Trustees release a report outlining the state of the program's finances. This year's report was delayed by many months, but it was finally released at the end of August.

Unfortunately, the news wasn't great. According to the Trustees, Social Security's combined trust funds are expected to run out of money by 2034. And unless lawmakers come up with a fix, once those funds are depleted, benefit cuts will absolutely be on the table.

Bad news for beneficiaries

Millions of seniors today rely on Social Security as a critical income source. And many current workers expect to fall back heavily on Social Security once they're ready to retire.

Social Security card.

Image source: Getty Images.

But now, the Social Security Trustees expect the program's trust funds to run dry by 2034, one year earlier than the projected timeline they pointed to in last year's report. Why? We can largely thank the pandemic for that.

Social Security gets the bulk of its revenue from payroll taxes. But over the past year, unemployment has been rampant as the pandemic caused millions of jobs to be shed.

In recent months, the jobless rate has declined, dropping to levels that were considerably lower than the levels we saw back in the spring of 2020. But the damage has already been done as far as Social Security is concerned, and so now, its safety net will be depleted a year sooner.

Once those trust funds are out of money, Social Security will only be able to pay 78% of promised benefits to retirees. And that's a problem.

Right now, Social Security is able to replace about 40% of the average earner's pre-retirement wages. But most seniors need a good 70% to 80% of their former income to live comfortably in retirement (and yes, there's wiggle room with those percentages, but for the most part, replacing 40% of previous income won't cut it for seniors).

If benefits are cut by 22%, Social Security will replace an even smaller percentage of pre-retirement wages. And that could leave seniors without savings in a very precarious financial position.

Unfortunately, there's not too much current beneficiaries can do to make up for benefit cuts other than look at part-time work and try reducing expenses. But workers who aren't yet retired do have an opportunity to make up for a future reduction in benefits -- namely, by saving diligently for retirement while they can.

Contributing $500 a month to an IRA or 401(k) plan over 30 years will result in a savings balance of about $680,000 if that money is invested at an average annual 8% return during that time. That 8% is a few percentage points below the stock market's average, and therefore a reasonable return to plug in for those who invest their retirement savings aggressively.

Of course, benefit cuts aren't inevitable. Lawmakers could still swoop in and find a way to prevent them from happening. But today's workers are better off preparing for that possibility so they're not left scrambling by the time retirement rolls around.