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3 Big Social Security Changes That Could Shake Up Your Retirement

For millions of Americans, Social Security is a lifeline. In fact, nearly one-quarter of U.S. adults 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, that same survey also found that a whopping 70% of participants worry that Social Security won't be there for them when they're ready to retire.

Social Security has been a hot-button issue for years, but it's been especially pressing recently as more Americans worry about the program's future. There are some big problems plaguing Social Security, and there could be even bigger changes on the horizon.

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1. Potential benefit cuts

The biggest concern for Social Security right now is the possibility of benefit cuts. The program is funded primarily through payroll taxes. The taxes of current workers fund the benefit payments for today's retirees.

However, the Social Security Administration (SSA) is currently paying out more in benefits than it's receiving from taxes, which has resulted in a deficit. The SSA has been dipping into its trust funds to avoid reducing benefits, but those trust funds won't last forever.

According to the most recent estimates from the SSA Board of Trustees, these trust funds will likely be depleted by around 2035. If nothing changes between now and then, benefit cuts could be on the table.

To be clear, Social Security is not going bankrupt. At this point, the SSA estimates that once the trust funds are depleted, there will still be enough income to cover around 80% of future benefits. In other words, while benefits won't go away entirely, seniors could face benefit cuts of up to 20% by 2035.

2. Increased full retirement age

These potential benefit cuts assume that lawmakers won't find a solution to Social Security's cash shortage before 2035. But even if Congress can come to an agreement, it will still likely result in some big changes to the program.

One of the potential solutions is to raise the full retirement age (FRA). Your FRA is the age at which you're entitled to your full benefit amount, based on your work record, and is age 67 for anyone born in 1960 or later.

Some politicians have recommended raising the FRA to 68 or even 70, which would reduce the SSA's total expenses and help eliminate some of the cash shortfall. But for seniors, it would mean waiting longer to receive the full benefit amount.

Also, with a higher FRA, more seniors may end up claiming early. If you file for benefits before your FRA, your monthly checks will be permanently reduced. Say your FRA right now is age 67, but it's eventually raised to 70. If you still file at 67, you'd then be claiming three years early, resulting in much smaller checks.

3. Reduced benefits for higher earners

Another potential solution is to reduce benefits for higher earners. This would also decrease the SSA's expenditures, partially reducing the shortfall.

Because this is still just a proposal, there's little information as to who, exactly, this would affect. Some lawmakers have suggested reducing benefits for the top 20% of earners, but it's unclear what the income limits would be under this proposal.

It's also important to point out that neither of these solutions would fully solve Social Security's problem. Raising the FRA would only eliminate around 14% of the cash shortfall, according to data from the University of Maryland, while reducing benefits for high earners would eliminate around 11%.

Other changes to watch out for

The most popular and effective solution for Social Security's cash shortage is to raise taxes for those earning more than $400,000 per year. Around 79% of Republican voters and 88% of Democrats support this proposal, according to the University of Maryland, and it would also eliminate around 61% of the shortfall.

So far, lawmakers haven't come up with a single solution that would completely eliminate the cash shortage. That means Congress may need to implement more than one of these proposals to fully solve the problem.

Nothing is set in stone yet, so it's unclear what the future holds for Social Security. But by staying aware of these potential changes, you can gauge how much you'll be able to rely on your benefits — making it easier to plan for retirement.

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