I’m not worried about social security cuts. Here’s why | personal finance

(Maurie Backman)

You may have heard rumors that Social Security is running out of money. So here’s the good news: it’s not.

Social Security’s main source of income is payroll taxes, the ones we all see being deducted from our paychecks. And as long as those taxes remain in place, the program can keep going.

That said, in the coming years, Social Security expects payroll tax revenue to decline substantially as baby boomers leave the workforce en masse. The program has trust funds that you can tap into to keep up with scheduled benefits, but only for a limited time. Once those funds run out of money, benefit cuts will be a strong possibility.

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Meanwhile, Social Security trustees recently projected that the program’s trust funds will run out by 2035. That means benefit cuts could be on the table in just over a decade.

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That’s something that has a lot of people worried, and it’s understandable. But I’m not worried about benefit cuts for a good reason.

My retirement does not depend on Social Security

As someone who writes about Social Security regularly, I’ve known for a long time that the program may have to reduce benefits in the future. Now many people are convinced that lawmakers will not allow benefit cuts to occur. And the truth is that it is difficult to say if they can be prevented or not.

That’s why my retirement strategy has always been to assume I’ll get very little money from Social Security and make up for it by building a solid savings bank. In fact, when I do my retirement income calculations, I’m actually working on the assumption that I won’t receive anything from Social Security and that any benefits that come my way are actually extra money that I can use for fun purposes, like entertainment. and travel.

This strategy allows me to take control of my retirement instead of relying on a program whose future is uncertain (and by that, I don’t mean that Social Security will go away, just that it’s hard to predict what benefits will be worth below the line). And also, it pushes me to work hard and save a lot.

These days, I’m not only maxing out my individual 401(k), but I’m also aiming to save extra money from my earnings in a brokerage account whose investments are earmarked for retirement. On top of that, I hope to continue working in some capacity in retirement, partly because I enjoy what I do and want to keep busy, but partly because I like the idea of ​​continuing to earn an income.

Many people retire and decide that they will never earn another dollar again. That’s fine for some people. But it’s not an arrangement I’m comfortable with.

How to worry less about Social Security cuts

Social Security cuts are one possibility current and future beneficiaries may have to deal with. If that worries you, I suggest you work on increasing your savings rate and find ways to cut spending now to free up more cash.

If you’re approaching retirement without very strong savings, I also suggest you delay leaving your workforce a few more years and use that time to build your savings. At the same time, you may want to start networking to align part-time work within your field to have another source of income once full-time work is no longer an option.

Of course, you can also consider working in a new field in retirement, one that interests you more than your current career. That’s something many seniors do, and it has the joint purpose of bringing them joy and income.

The reality is that Social Security cuts are a distinct possibility, and we’re not that many years away from seeing benefits potentially reduced. If you want to worry less about that, get ready to rely less on Social Security. It really is that simple.

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