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 isn’t.

Social Security’s main source of income is payroll taxes – the ones we all see taken from our paychecks. And as long as those taxes remain in effect, the program can continue to run.

That said, Social Security expects payroll tax revenues to fall significantly in the coming years as baby boomers leave the workforce en masse. The program has trust funds that it can use to track its planned benefits, but only for so long. Once those funds run out of money, a reduction in distributions is a big possibility.

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Meanwhile, the Social Security Trustees recently predicted that the program’s trust funds will run dry by 2035. This means that benefits could be on the table in just over ten years.

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That’s something a lot of people worry about, and it’s understandable. But I’m not worried about benefits for one major reason.

My pension does not depend on social security

As someone who regularly writes about Social Security, I’ve known for a long time that the program should reduce benefits over time. Now many people are convinced that legislators will not let benefit cuts happen. And the truth is, it’s hard to tell if they’re preventable or not.

That’s why my retirement strategy has always been to assume I’m getting very little Social Security money, and make up for that by building myself a solid nest. Basically, when I do my retirement income calculations, I’m assuming that I’m not getting anything from Social Security, and that any benefits that come my way are really just extra money that I can use for fun purposes, such as leisure and travel.

This strategy allows me to take my retirement into my own hands rather than relying on a program whose future is uncertain (and by that I don’t mean Social Security will disappear, but rather it’s hard to predict what the benefits will be along the line). And it also forces me to work hard and save hard.

These days, not only am I getting the most out of my solo 401(k) plan, but I’m also trying to funnel extra money from my earnings into a brokerage account whose investments are earmarked for retirement. In addition, I hope to continue working in a certain way during retirement, partly because I like what I do and want to keep busy, but partly because I enjoy continuing to earn an income.

Many people retire and decide never to earn a 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 that current and future beneficiaries may face. If that’s your concern, I suggest pushing yourself to increase your savings rate and finding ways to cut back now to free up more money.

If you’re nearing retirement without a very strong nest, I also recommend that you put off your staff’s departure for a few more years and use that time to increase your savings. At the same time, you may want to start networking to organize part-time work within your field so that you have another source of income once full-time work is no longer an option.

Of course, during your retirement you can also look into a new field – one that interests you more than your current career. That’s something many seniors do, and it serves the common purpose of bringing them both joy and income.

The reality is that Social Security cuts are an obvious possibility, and we’re not that many years away from potentially reduced benefits. If you want to worry less about that, make sure you are less dependent on Social Security. It really is that simple.

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