I’m not worried about Social Security cuts. Here why | Smart Change: Personal Finance

(Morri Bachmann)

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

The main source of Social Security income is payroll taxes — the ones we all see taken out of our payroll. As long as these taxes remain in place, the program can continue to operate.

However, in the coming years, social Security Expect payroll tax revenue to decline dramatically as boomers exit the workforce in droves. The program has trust funds that he can tap into to keep up with scheduled benefits, but only for a long time. Once this money runs out, Interest cuts It would be a strong possibility.

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Meanwhile, Social Security trustees recently predicted 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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This is something that worries a lot of people, and it’s understandable. But I’m not worried about cutting benefits for one big reason.

My retirement does not depend on Social Security

As someone who writes about Social Security on a regular basis, I’ve known for a long time that the program may have to continually cut benefits. Now many people are convinced that lawmakers will not allow interest cuts to happen. The truth is that it is difficult to determine whether it can be prevented or not.

That’s why my retirement strategy has always been to assume I’ll get very little money out of Social Security, and I make up for it by building a strong egg for myself. In fact, when I do my retirement income calculations, I’m actually working with the assumption that I won’t get anything from Social Security, and that any benefits that come my way are really just extra money that I can use for recreational purposes, like leisure and travel.

This strategy allows me to control my retirement rather than relying on a program whose future is uncertain (and by this, I don’t mean that Social Security will fade away, but rather, it’s hard to predict what benefits will be of value below the line). It also drives me to work hard and save hard.

These days, I’m not only making the most out of my single 401(k) plan, but I’m also aiming to make extra money from my earnings in a brokerage account whose investments are earmarked for retirement. Moreover, I hope that keep working In some capacity during retirement, partly because I enjoy what I do and want to keep busy, but partly because I love the idea of ​​continuing to earn income.

Lots of people retire and decide they’ll never make another dollar again. This is fine for some people. But that’s not an arrangement I’m comfortable with.

How to Worry Less About Social Security Cuts

Social Security cuts are a possibility that current and future beneficiaries may need to deal with. If this is of interest to you, I suggest pushing yourself to increase your savings rate and finding ways to cut spending now to free up more money.

If you’re about to retire without a very strong presence, I also suggest delaying the exit of your workforce for a few more years and using this time to increase your savings. At the same time, you may want to start connecting with part-time work in your field so that you have another source of income once full-time work is no longer available.

Of course, you could also look to work in a new field during retirement – one that interests you more than your current career. This is something many seniors do, and it serves the common purpose of bringing them happiness and income.

The truth is, cuts to Social Security are a distinct possibility, and we’re not far from many years away from the possibility of lower benefits. If you want to reduce worry about it, prepare yourself to reduce reliance on Social Security. It’s really that simple.

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