As of November 2023, over 52.6 million people receive monthly retirement-related benefits from Social Security, and the program pays out nearly $95 billion in retirement benefits each month. That's a lot of people depending on a lot of money from a program that looks like it's on very shaky financial grounds.
Don't just take my word for it, though. Social Security's own trustees warn that the trust fund that supports the program's retirement benefits will deplete by 2033, and taken as a whole, the system's total trust funds will empty by 2034. Depending on whether you look at the trust funds as separate or combined, that would result in a reduction of somewhere in the neighborhood of 20% to 23% of benefits.
No matter how you slice it, the reality is that in 2024, Social Security will be just a decade away from disaster. The good news on that front is that history suggests that Congress will eventually come together and patch the program. Unfortunately, that same history indicates that you will likely be paying for those patches through some combination of tax increases or benefit cuts .
Winter is coming -- plan now
As a result, you should start planning now for the future that changes to Social Security will bring. Your goal is to put yourself in a better spot to handle them when they get here. On that front, investing is one of the most powerful tools at your disposal to prepare for that eventuality.
If taxes go up, then it's easier to cut back on future investments than to cut out core lifestyle costs in order to cover that increased burden you'll face. If benefits get cut, then the investments you put in place today can provide a solid nest egg to help cover the costs that Social Security won't be able to. Either way, the investments you're able to make between now and then can play a crucial role in helping you get through the transition that we'll all be facing soon.
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How to get to a spot where you can invest more
Of course, in today's era of higher costs for virtually everything, that's easier said than done. Still, when you boil it down to its essence, there are two moving pieces involved in coming up with money to invest: your income and your expenses. To be able to invest a bit more, you need to figure out how to get your income up, your expenses down, or some combination of both.
From an income perspective, you may be able to work overtime, pick up a second job, seek out ways to get a decent raise at your current job, or look for a higher-paying job elsewhere. (Writing these articles is my night job, and it's key to how I'm able to come up with money to invest.) You might also be able to find a one-time boost to your income by selling stuff you no longer need.
When it comes to expenses, it's useful to start by understanding where all your money is going today. By tracking your costs, you can often find absent-minded spending, forgotten subscriptions you no longer use, and repeated small purchases that add up to a lot. Those costs just might add up to a significant amount of "easy wins" that, by eliminating, you can free up a significant amount of cash.
After those easy wins, though, cutting costs effectively typically becomes a trade-off around the question of "how do I spend less, while still getting most of what I like?" A programmable thermostat, for instance, can help you reduce heating and cooling costs when your house is empty while keeping you comfortable when you're home.
Likewise, you might be able to do things like cut back on meal costs by bringing your own lunch from home a few days a week, while still going out with coworkers occasionally. Similarly, you can often buy last year's fashions at a lower price from the discount rack or outlet store, helping you have nice outfits at a much more reasonable cost.
In addition to your ongoing expenses, look for ways to cut your debt-service costs. If you can get a debt completely paid off, you instantly free up cash flow. You save both the principal payment and the interest payment, which can also free up cash you can use to invest.
Get started now
With only around a decade left before Social Security's trust funds empty, time is rapidly running out of runway where relatively simple changes can help you prepare for the future of that critical program. That makes today a great day to start putting your plan in place to get you to -- and through -- whatever patches Congress ultimately aligns to for Social Security.
