In recent years, millions of older Americans have relied on Social Security to cover their daily living expenses. This support is vital as they reach retirement, but the landscape could soon change. Cuts in Social Security are not just a rumor, but a real possibility that could hit in less than a decade.
The increase in the retirement of baby boomers, coupled with the decline of younger workers in the labor market, is putting pressure on the system. The program is funded primarily through payroll taxes, and if collections fail to balance the outflow of retirees, the ability to pay will be constrained.
According to the Social Security Trust report, by 2034 the combined funds could be exhausted, which would mean that only 81% of current benefits would be guaranteed.
Possible cuts in Social Security and their causes
Social Security faces a complex scenario: more retirees, fewer contributors and a system that has not been adjusted to the country’s changing demographics.
This combination makes cuts in Social Security appear as an alternative to prolong the life of the program.
Social policy experts say that the government’s decisions in the coming years will be key.
Although President Donald Trump, in his second term beginning in January 2025, has stated that there will be no immediate cuts, the truth is that financial adjustments are inevitable if the system’s funding sources are not strengthened.
For seniors and future retirees, this means preparing themselves now so as not to depend exclusively on this income.
How to protect yourself
If you are approaching retirement or are already a beneficiary, there are steps you can take to reduce the impact on your finances should Social Security cuts materialize.
Steadily increase your savings
One of the most important steps is to create an additional fund for your retirement.
Living costs continue to rise and Social Security alone may not cover them.
Increasing your IRA or 401(k) contributions can be an effective alternative.
For example, a 40-year-old with $60,000 saved who contributes $300 a month could accumulate about $674,000 by age 65, with an average return of 8% per year. The key is consistency and early planning.
Evaluate changing your place of residence
Another option is to move to areas with a lower cost of living.
If maintaining a large home in a large city is untenable, considering a more affordable location can make all the difference.
Reducing fixed expenses such as housing and utilities allows Social Security money to go further, even with possible cuts.
Work part-time in retirement
Retirement does not necessarily mean stopping work altogether.
More and more older adults are opting for part-time jobs, consulting or freelance work.
In addition to generating additional income, this helps you stay physically and mentally active.
Those with professional experience may offer services as consultants, while others choose to explore new areas, from freelance work to small ventures that provide flexibility.
The future of Social Security and what you can do about it
While Social Security faces an uncertain outlook, your financial stability doesn’t have to follow the same fate.
Early planning, income diversification and adapting to a sustainable lifestyle are key to facing a future with possible cuts in Social Security.
This article was originally published in Nueva News.
