Millions of seniors depend on Social Security in retirement; for many, it's their sole source of income.
But big changes could be looming, and the Social Security program is a hotly debated topic in Washington right now. Some of those potential changes could affect your benefits, and there's a chance your payments could shrink in the future.
While none of these developments are set in stone, it's still wise to stay up-to-date just in case. And there are three potential Social Security changes to keep your eye on.
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1. Future benefit cuts
For years, the Social Security program has been running at a deficit, meaning it's been paying out more in benefits than it's receiving in taxes and other sources of income. To cover that deficit, it's been dipping into its trust funds -- but those funds won't last forever.
According to the Social Security Board of Trustees' 2022 report on the state of the program, the trust funds are projected to run dry by 2034, at which point there will only be enough income to cover around 77% of future benefits.
In other words, if Congress can't find a solution before 2034, benefits could be cut by up to 23%.
2. Higher retirement age
As we inch closer to 2034, Congress has been under increased pressure to solve Social Security's cash shortfall. While lawmakers haven't agreed on anything yet, one of the potential solutions is to raise the retirement age.
Your full retirement age (FRA) is the age at which you'll receive the full benefit amount you're entitled to based on your work history. Currently, the FRA is between ages 66 and 67, but some lawmakers have proposed raising it to 68 or older.
A higher FRA means seniors must wait longer to collect their full benefit amounts. And if you begin claiming before your FRA, you'd receive reduced monthly payments.
3. Reduced benefits for high earners
Another potential solution to Social Security's cash shortage is to reduce benefits for the top 20% of earners.
The highest earners would still collect larger payments than the average retiree, but the gap would be smaller. Because this is still just a proposal, there's no firm information regarding how much benefits would be reduced or what the income cutoffs might be. But if this proposal were to become law, higher earners might see benefit cuts in the future.
What will happen with Social Security?
Social Security's future is still uncertain. Because the program is vital to millions of Americans, there's a good chance Congress will find some sort of solution to avoid benefit cuts. But what they'll decide on is still unclear.
There's also a chance Washington may implement several changes to Social Security because it will be tough for any one proposal to completely solve the program's cash shortfall. For example, raising the retirement age is only expected to eliminate around 14% of the shortfall, according to estimates from the University of Maryland, and reducing benefits for high earnings may only eliminate 11% of the shortfall.
One of the most popular proposals is to raise taxes for those earning more than $400,000 per year, but even that solution would only reduce the shortfall by around 61%. In other words, you may see multiple big changes in the future to avoid benefit cuts.
Nobody knows whether benefit cuts are on the horizon, but it's wise to prepare just in case. By taking steps now to build up your retirement savings and reduce your dependence on Social Security, potential cuts may be easier to endure.
