Why You Need to Worry About Social Security’s Future Now — Even If You’re Nowhere Near Retirement

It’s a big myth that Social Security is running out of money and won’t be able to pay benefits a few years down the line. While the program is facing a financial shortfall, it’s not in danger of going away completely. But Social Security might be forced to slash benefits if lawmakers don’t find a way to pump more revenue into it.

In the coming years, Social Security expects to owe more money in benefits than it takes in. And a big reason is that baby boomers are retiring in droves. Not only does that mean Social Security is getting less payroll tax revenue, but it also means it’s on the hook for more monthly benefit payments. And that’s not a winning combination.

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Social Security has trust funds it can draw from to keep up with scheduled benefits for a period of time. But once those funds run out of money, benefit cuts will be on the table.

Unfortunately, though, we’re not talking about a far-off event. Seniors may be looking at reduced benefits in a little over a decade, based on recent projections.

If you’re in your 20s, 30s, or even 40s, you might assume that’s something you don’t have to worry about or deal with. But actually, now’s the time to concern yourself with Social Security cuts — even if you’re years away from being eligible for benefits.

Start reacting now

As a general rule, it’s a good idea to minimize your personal stress load as much as possible. If you’re 40 years away from retiring, you might assume that it’s best not to make Social Security cuts something you actively think about. But actually, it pays to get a bit worked up about those cuts at this stage of life — not because you need the stress, but because you might need the push to start saving for retirement independently to make up for lower Social Security benefits down the line.

The sooner you start saving and investing for retirement, the more time you’ll give your money to grow. And with a lengthy savings window, you may actually find it easy to build up a nest egg that helps compensate for smaller Social Security benefits.

Say, for example, that retirement is 40 years away. If you sock away $400 a month in a savings plan and your investments deliver an average annual 8% return, which is below the stock market’s average, you’ll end up with $1.24 million. But if you wait 20 years to start saving and investing that $400 a month, you’ll end up with just $220,000, assuming that same 8% return.

That’s why it does pay to worry about Social Security’s future, even though it’s current and near-retirees who stand to take a hit sooner if benefit cuts come down the pike. Taking action at a fairly young age by building savings could spare you a world of financial stress if your Social Security income is lower than it should be.

Of course, lawmakers don’t want to see millions of seniors plunged into poverty, and that might very well happen if Social Security cuts are allowed to happen. So all told, reduced benefits aren’t a guaranteed thing. But it’s important to prepare for that possibility by building a solid nest egg — even if Social Security and retirement are the last thing on your mind right now.

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