Most of my friends range from their late 30s to late 40s, which means retirement isn't a near-term thing, but it's also not so far off. In fact, it's a good time to start seriously planning for a post-career existence by coming up with goals, boosting savings, and figuring out how Social Security fits into the mix.
I've had a number of friends tell me that they're not expecting to get a dime in benefits from Social Security, and, as such, are forcing themselves to save for retirement independently. Now a big part of me doesn't want to tell them the truth about Social Security's future because I want them to stay motivated to keep funding their IRAs and 401(k)s. But I'd be remiss if I didn't share what's really going on with the program.
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Benefits are not going away
A lot of people are convinced that Social Security will soon meet its demise and stop paying benefits completely. So I'd like to reassure you that that particular scenario is not on the table.
Social Security is certainly facing some fiscal challenges that will make keeping up with scheduled benefit payments difficult in the coming years. And while Social Security can tap its trust funds to bridge that gap, once those funds run dry, benefit cuts will be a strong possibility.
Meanwhile, the program's Trustees expect the Social Security trust funds to be out of money by 2034. That timeline has the potential to change in the coming years -- for better or for worse. But either way, benefit cuts might happen once Social Security has no more cash reserves to fall back on. And as of now, benefit cuts are expected to land in the vicinity of 20%.
But while Social Security cuts are clearly far from ideal, the program is not going away completely. To put it another way, receiving 80% of benefits is a far cry from receiving 0%.
So to those of you who are convinced that Social Security will soon be a thing of the past, fear not -- you should be in line for some sort of benefit once you retire. It may not be the benefit you hoped for or should've received based on your earnings, but it should be a lot more than $0.
And also, benefit cuts are by no means set in stone. And it's not in lawmakers' best interests to allow them to happen.
In fact, Social Security has faced the possibility of benefit cuts before. And yet it's managed to avoid that fate. So maybe we won't see cuts this around, either.
The real deal
I'd love to be able to pretend that Social Security is on the brink of destruction so that more people are motivated to build nest eggs of their own. The truth is that living on Social Security alone can make for a financially stressful retirement, so I want everyone to understand how important it is to go in with a least a decent amount of savings.
But I'm not going to lie and pretend that Social Security is at risk of disappearing when it isn't. And frankly, I'd like to see that rumor come to an end, as it's bound to be an extremely distressing thing to hear for those who are already retired and extremely reliant on the benefits they collect.
