There have been persistent rumors for years claiming Social Security is about to disappear. Fortunately, though, those rumors are untrue. Payroll tax money is Social Security’s main source of funding, thus it is not at risk of fully disappearing. Additionally, Social Security can stay in place as long as employees are still required to pay taxes on their income in order to support the program. However, this does not imply that Social Security is going to be able to continue paying out benefits as planned.
Social Security Trust Funds
It is anticipated that in the upcoming years, the program will owe retiring and retired seniors more than it will receive in labor force payments. Furthermore, Social Security’s trust assets may eventually run out even though it can temporarily use them to pay out benefits as anticipated. In fact, according to recent estimates, Social Security’s funds from trusts will run out of funds in 2034, or in just ten years. Therefore, legislators are running out of time to devise a plan to stop those cuts. Whether you are still employed or receiving Social Security, it is a good idea to devise a strategy for handling those cuts.
Make Sure You Have A Strategy In Place
Cuts to Social Security are not a given. However, it is not encouraging that politicians have not yet come up with a preventive measure. Therefore, if that scenario arises, it’s an excellent concept to plan how you’ll handle receiving a smaller sum from Social Security. Returning to the workforce could be an option to consider if you’ve previously retired. The amount of money that could disappear from each month’s Social Security check could be replaced by earnings through a part-time job.
Reducing the size of your house and perhaps your lifestyle is an additional choice. You can keep the difference as income if you are able to sell your larger house and get a replacement for half as much money. Additionally, cutting back on expenses such as property taxes and upkeep could result in significant savings. Therefore, cooking more meals at home rather than going out to eat frequently may help you save money. Another option is to consider relocating to an area of the nation with a generally lower cost of living. Just be aware that certain states impose taxes on Social Security payouts. In the meanwhile, whether you’re still employed, the easiest way to deal with Social Security reductions is to continue saving money. You are less likely to experience financial hardship on a reduced Social Security pension the more nest fund you are able to carry into retirement.
Let’s take an example where you are 35 years old and have saved up $15,000 so far. Over the course of the next 30 years, if you pay $500 monthly to your retirement strategy and your portfolio yields an average annual return of 8% a little less than the average return of the stock market you would have more than $830,000. Congress has previously bailed up Social Security in the face of impending cuts, so it’s possible that it may happen again this time. However, the wisest course of action is to make arrangements in the event that later on you receive a lesser amount from the program than anticipated.
