You may have heard rumors that Social Security is going away. But that's just plain not true.
Social Security gets the bulk of its funding from payroll taxes. So as long as we have an active workforce, the program should be in a position to pay benefits to some degree.
But in the coming years, as baby boomers exit the workforce in droves, Social Security's primary source of revenue is expected to shrink. And unless lawmakers manage to find a way to pump more money into the program, Social Security may have to cut benefits universally once its trust funds run out.
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We don't know exactly when that will happen, but as of earlier this year, the Social Security Trustees were predicting 2034. That estimate could change in a year or two. But all told, it's fair to assume that in about a decade's time, Social Security will not be in a position to keep up with scheduled benefits.
That's a scary thought for current retirees as well as future ones. But I'm not losing sleep over the idea of Social Security cuts for one big reason.
I'm not counting on Social Security anyway
I know a lot of people who plan to rely on Social Security very heavily in retirement for income. But I don't intend to do that.
I'd like to be able to pay my retirement expenses with money from savings, earnings, and investments. And I'm currently making a lot of sacrifices in an effort to make that happen.
I live well below my means in order to max out a solo 401(k) every year, invest in a taxable brokerage account, and set aside other funds for retirement savings purposes. Trust me when I say that spending that money instead of saving it could enhance my quality of life now. But I feel it's important to not have to worry about money in retirement, so I'm very motivated to save.
As such, my hope is that any income I receive from Social Security will be extra money that isn't essential to paying my bills. And while I'd prefer a higher monthly benefit to a lower one, since it's money I'm not really counting on, I'm not particularly worried about Social Security cuts.
In fact, I intend to treat Social Security income as a bonus of sorts. If I get $2,000 a month, that's obviously better than $1,500 a month. But if Social Security cuts leave me with $1,500, that's OK too.
I realize not everyone can be so blasé about Social Security cuts. And I'm extremely sympathetic to current retirees who can't go back in time and build savings to compensate for a potential reduction in benefits.
My hope is that lawmakers will find a way to prevent benefit cuts so that current retirees don't suffer financially, and so that future retirees who aren't able to save independently don't fall victim to a similar fate. But because I'm not planning to rely on Social Security, I'm not going to spend time and energy worrying about benefit cuts.
