Social Security is a lifeline for many retirees, especially if your savings are falling short. In fact, nearly one-quarter of workers expect their benefits to be their primary source of income in retirement, according to a 2022 survey from the Transamerica Center for Retirement Studies.
However, depending too much on your benefits could potentially put your retirement at risk. Social Security isn’t as reliable as it used to be, and the problem could worsen over time. Here’s why.
The future of Social Security
As inflation continues to surge, Social Security has been struggling to keep up. Over the past year, inflation is up 9.1% according to the most recent data from the Bureau of Labor Statistics. However, seniors only received a 5.9% cost-of-living adjustment (COLA) this year.
In other words, the costs of everyday goods and services are increasing faster than Social Security, and your benefits won’t go as far as they used to.
This isn’t just a recent issue, either. In fact, since 2000, Social Security benefits have lost around 40% of their buying power, according to a report from The Senior Citizens League. Despite retirees receiving COLAs most years between 2000 and 2021, benefits have not been able to keep up with rising costs.
As a result, retirees will have a tougher time surviving on Social Security alone — especially if this problem worsens over the coming decades.
What you can do to prepare
You may not be able to control factors like inflation and the annual COLA, but there are steps you can take to protect your finances in retirement.
For one, you can save more in your retirement fund. It’s not easy to save, especially when money is tight. But if Social Security isn’t as reliable in the future, you may need to depend heavily on your savings to pay the bills. Even if you’re not able to save much, stashing away as much as you can afford will go a long way in retirement.
You could also consider delaying Social Security. For every month you wait to begin claiming (up to age 70), you’ll receive slightly larger checks. Depending on how long you delay, you could collect hundreds of dollars more per month. If Social Security continues to lose buying power, these larger checks can help cushion the blow.
If you’re already retired, it may be worthwhile to consider going back to work — at least part-time. This isn’t the preferred option for many retirees, understandably. But if Social Security is your primary source of income, bulking up your savings while you’re still able to work can be a smart move.
Making the most of Social Security
Your benefits were never designed to be your sole source of income, but it’s even more important now to consider how far Social Security will realistically go in retirement.
As benefits continue to lose buying power, it’s wise to start preparing now. By building up your savings and decreasing your dependence on your monthly checks, you can enjoy retirement as comfortably as possible regardless of what happens with Social Security.
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