Social Security is a lifeline for many people who need the income from their retirement checks to support them. That's why the news that the program is facing a potential cashflow problem is cause for such concern.
The most recent Social Security trustee's report shows that the trust fund from which benefits are paid could be depleted as early as 2034. If that happens, the money coming in from current workers who pay Social Security taxes would still be available, but an automatic benefits cut of as much as 20% would have to go into effect because this wouldn't provide quite enough to pay all that was promised.
The big question is, should you be worried about this? And the answer depends on the specifics of your situation.
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Here's why I'm not worried about benefit cuts
Although I know there is a looming possibility of a Social Security benefit cut happening, I am not concerned for one simple reason: I am not counting on Social Security as a crucial source of retirement income.
I'm well aware that I don't have any control over what happens to retirement benefits. The automatic cuts could go into effect, and my future benefit could end up being reduced. Or lawmakers could make changes to prevent the automatic reduction, but that end up providing me with less money anyway.
They could push full retirement age back, which would mean I'd either have to delay my claim and support myself for longer without benefits or would get hit with early filing penalties and receive lower monthly payments. Or they could change the way Social Security raises are calculated, which would result in benefits having less buying power over time as payments increase at a slower pace than inflation.
These possibilities have all been on the table in discussions about Social Security's future, and I can't rule any of them out -- which is why I am absolutely not counting on my full Social Security benefits making up an essential part of my retirement income.
My goal is to make sure I have enough money to support myself in my senior years even if I never receive a dime of Social Security. I know that won't be the case, and I will get some money since Social Security can't run out entirely with its current funding stream. Current workers will always pay in enough money to provide most of the promised benefits. But I want to be sure I'm not relying on money that doesn't come, and by anticipating I'll get $0, I know I'll end up pleasantly surprised.
Since I'll have enough in my 401(k) and IRA to provide for all I need as a senior, I will be able to put off my Social Security benefits claim if I need to just in case lawmakers decide to raise the full retirement age. And any money that I do end up getting from retirement benefits I will just use as extra funds to enjoy life more.
Should you be worried about Social Security cuts?
Although I'm not worried about a cut to retirement benefits, others might be if they don't have plans to produce enough retirement income without Social Security.
The reality is that while some changes may happen, the most likely outcome is you will get the bulk of the money promised to you. Depending on what lawmakers do as far as shoring up Social Security, you may get a little less or have to wait a little longer, but some Social Security funds will be available.
Still, the surest way to avoid financial worries about Social Security's future is to set your own retirement goals so you also won't be reliant on this income source. It will mean saving more, but the peace of mind you'll have from knowing your future is entirely in your own hands could be well worth the extra sacrifice.
