Social Security is not in danger of going bankrupt and canceling benefits across the board. That's the good news. The bad news, however, is that benefit cuts are a distinct possibility once the program's trust funds run out of money.
According to the most recent projections, that could happen in 2035. It could also happen a bit sooner or later, depending on different factors.
The point, either way, is that Social Security cuts may be coming. And that makes me really nervous — but for the reason you might suspect.
I'm not banking on Social Security — but many other people are
The idea of Social Security cuts isn't new or shocking to me. I've been reading up on Social Security for years, and I've known for a long time that benefit cuts are a distinct possibility.
I also know that even without cuts, Social Security won't provide me with enough income to live comfortably in the absence of a job. That's why I don't intend to rely heavily on it as an income source to begin with.
For years, I've been maxing out my 401(k) and investing elsewhere in the hopes of growing myself a sizable nest egg. My goal is to rely on that money as my primary retirement income source, and use whatever income I get from Social Security as gravy — money I can spend on leisure, travel, or even charity, if I'm in a strong enough financial position to give some of it away.
As such, the reason Social Security cuts scare me so much is that I know a lot of people who aren't doing what I'm doing. Instead, they're saving minimally for retirement, if at all, and they're planning to fall back on Social Security as their primary income source in the future.
That's a dangerous thing without benefit cuts in the mix. But given the potential for cuts, I fear for my friends and family members who might struggle immensely once their time in the workforce draws to a close.
I'm also worried for current seniors who get the bulk of their income from Social Security. Many of those people missed the window to save, and since they're already retired, they can't go back in time and change the state of their nest eggs. If those people see their benefits slashed to the tune of 20% (a strong possibility based on recent financial projections), it could plunge them into poverty and sentence them to a world of stress at a time when they're at their most vulnerable.
Can Social Security cuts be avoided?
Lawmakers have tossed around different solutions for preventing Social Security cuts, but each one seems to have its share of drawbacks. Just as concerning is the fact that we could be only about a decade away from benefit cuts, yet no real action has been taken thus far to ward off that situation.
As we get closer to Social Security's day of reckoning, lawmakers may be inspired to act. But the longer they wait, they more benefit cuts become a solid possibility. And while I'm doing my best to have that not be a problem for me, I worry for the many people who could end up in a serious financial crunch if benefits are slashed across the board.
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