If Social Security Gets Cut, What Will You Do?
By Edward Sota (As seen in Kiplinger) What might that mean for you? Based on the trustees’ most recent “best estimates,” the Old-Age and Survivors Insurance (OASI) Trust Fund expects to be able to pay scheduled retirement and survivor benefits on a timely basis until 2033. After that, the report states, “The fund’s reserves will become depleted, and continuing program income will be sufficient to pay 77 percent of scheduled benefits.” In other words, it’s unlikely Social Security benefits would go away altogether. But if something isn’t done to fix the program’s funding problems in the next few years, future payments may need to be trimmed by 23%. Although Social Security was designed to provide the average retiree with about 40% of the income he or she earned before retiring, for many, the percentage is much higher. Among elderly beneficiaries, 37% of men and 42% of women receive half or more of their income from Social Security, according to the most recent data from the Social Security Administration (SSA). And 12% of men and 15% of women rely on Social Security for 90% or more of their income. What’s being done to fix the shortfall? But, as you can imagine, Social Security’s insolvency is a tough topic for politicians to tackle without risking a backlash from voters. Remedying the program’s money woes would likely require one or more of the following actions: None of these options is an easy sell, which probably explains why the last major bipartisan Social Security reform took place in 1983 under President Ronald Reagan. At that time, the law raised both the payroll tax rate and Social Security’s full retirement age, albeit slowly, from 65 to 67. It also made 50% of Social Security benefits taxable for recipients who exceed a predetermined income threshold. Today, that threshold is $25,000 for an individual and $32,000 for married couples filing jointly. A decade later, President Bill Clinton signed the Omnibus Budget Reconciliation Act, which included a provision that allowed up to 85% of Social Security benefits to be taxable when income was above a certain threshold. Today, that threshold is $34,000 for individuals and $44,000 for married couples filing jointly. Currently, both Republican and Democratic party leaders are saying that cutting Social Security benefits is off the table. And it seems doubtful that any change would affect the benefit amount or claiming age for current or soon-to-be retirees (55 and up). So there’s no need to panic about your payment amount at this point. Letting your emotions get the better of you can lead to sleepless nights and knee-jerk reactions — which probably isn’t good for you or your nest egg. What can you do in the meantime to help yourself? If you’re already retired, these moves might include: If you’re a few years away from retirement (55-plus), you also may want to consider: Kim Franke-Folstad contributed to this article. The appearances in Kiplinger were obtained through a public relations program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
If you feel anxious about the future of your Social Security benefits, you’re not alone.
It’s a common concern — both for retirees already receiving Social Security payments and for workers who expect to rely on this important income stream someday.
In a 2022 survey of U.S. workers by Transamerica, 37% of respondents named the potential reduction or elimination of Social Security benefits as a top retirement fear. And those worries aren’t without merit. According to the 2023 Social Security trustees report, both Social Security and Medicare face long-term financing shortfalls.
Even if your benefits will have only a small role in your retirement income plan, a payment reduction is (to put it mildly) an unpleasant possibility. But for those folks who rely heavily or almost entirely on their monthly Social Security benefits to make ends meet, it could be devastating.
The concerns raised in the 2023 report aren’t new. The trustees have been warning that a shortfall could occur in the early or mid-2030s for over a decade. And proposed fixes have floated around for years.
If you’re worried, there may be positive changes you can make now to shore up your retirement income — no matter what comes down from D.C. in the future.