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The 1 Reason Not to Worry About Social Security Cuts

You may have heard rumors that Social Security is going away. Thankfully, that’s just not true.

What is true, however, is that according to the program’s Trustees, Social Security is facing a revenue shortfall. And if lawmakers don’t intervene, once the program’s trust funds get depleted, Social Security might have to cut benefits to the tune of about 20%. Furthermore, those cuts could be on the table as early as 2034, according to the Trustees’ most recent projections.

Clearly, the idea of Social Security cuts is a scary one for current and future recipients alike. But here’s why you shouldn’t lose too much sleep over the idea of a reduced Social Security benefit just yet.

Social Security cards.

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Lawmakers don’t want to deal with a widespread poverty crisis

Current workers have a nice heads-up on the whole Social Security benefit cut situation. So it’s possible for active members of the workforce to make an effort to boost their savings to compensate for those cuts down the line.

Current retirees, for the most part, don’t have that option. Retirees generally aren’t able to add to savings in the absence of having a job. And because of that, Social Security cuts could put current beneficiaries in a really dire financial spot.

That’s something lawmakers are well aware of. And it’s also a situation they’re apt to be invested in preventing to the greatest extent possible.

After all, it’s not a good thing to have millions of seniors plunged below the poverty line and forced to rely more on government assistance. If Social Security were to cut benefits, it could result in more older Americans needing food benefits, among other things. That’s apt to put a strain on other limited resources. So lawmakers might prefer to pump money into Social Security instead so that beneficiaries can remain self-sufficient.

Worry just enough to take action

Clearly, there’s a lot of downside to allowing Social Security to move forward with benefit cuts. And that’s why you shouldn’t assume you’re doomed to collect a lower benefit than what your earnings record entitles you to.

At the same time, it is a good idea to work on boosting your savings in case benefit cuts end up being reality. If you’re still holding down a job, cutting back on spending modestly could free up a few extra thousand dollars a year for your IRA or 401(k) plan. Invest that money in a savvy manner, and it could leave you with a robust enough nest egg to cope nicely with Social Security cuts — whether they amount to 20% or end up being far less substantial.

In fact, there’s really no such thing as having too much savings for retirement. So if you boost your IRA or 401(k) contributions over the next 10 years only to then learn that lawmakers have managed to find a way to prevent Social Security cuts, you certainly won’t be in a worse financial position. If anything, you’re apt to land in a far better one for retirement given that Social Security, without cuts, will only give you limited buying power.

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