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I Used to Be Worried About Social Security Cuts. Here’s Why I’ve Changed My Tune.

When I first started writing about Social Security about 10 years ago, I kept reading about the potential for benefit cuts. And back then, that scared me.

I’ve always known that workers should not aim to retire on Social Security alone. In a best-case scenario, the program will replace about 40% of your pre-retirement paycheck if you’re an average wage-earner, and most seniors need a lot more replacement income than that to maintain a comfortable lifestyle.

Still, I always figured I’d be reliant on Social Security to some degree, and that benefit cuts had the potential to upend my retirement. Thankfully, I learned about the possibility of those cuts at a time when I had the opportunity to make changes to my retirement planning. And because of those changes, I’m no longer as worried about Social Security cuts as I once was.

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Benefit cuts are still a possibility

Let’s get one thing straight — Social Security cuts are, unfortunately, still very much on the table. In the coming years, Social Security expects to pay more in scheduled benefits than it collects via payroll tax revenue as older workers wrap up their careers in droves.

Social Security can tap its trust funds to keep up with its financial obligations for a period of time. But once those trust funds run dry, which is now expected to happen in 2035, benefit cuts will be a strong possibility unless lawmakers somehow manage to come up with a fix.

As such, when I say I’m no longer worried about Social Security cuts, it’s not because I’m convinced they won’t happen. Rather, it’s because I’ve taken steps to make those cuts less problematic for me.

Boosting savings and capitalizing on a global crisis

In the past seven years or so, I’ve made a number of financial decisions that have contributed to my more well-adjusted approach to Social Security cuts.

First, I boosted my retirement savings rate considerably. Instead of merely aiming to max out a solo 401(k), I’ve taken to saving beyond that point in non-tax-advantaged accounts to increase the total amount of money going into my nest egg.

My second decision ties into the first. When my income increased a number of years back, I didn’t upgrade my lifestyle. I stayed in the same house and drove the same (aging) car. That made it possible to divert extra income toward savings.

Finally, I took advantage of the world shutting down in 2020. That year, I spent little, worked more due to being stuck at home, and continued to put money into the stock market despite the turbulence that ensued that spring once the pandemic hit U.S. soil.

All of these decisions have made it so that my long-term savings are now in a stronger place. And because of that, I’m worried less about Social Security cuts because I have my own income to rely on.

Aim to retire mostly on your savings

Regardless of whether Social Security ends up cutting benefits or not, I think the safest approach to retirement is to plan to live mostly on your nest egg and use Social Security as a supplement. But it’s especially important to take this approach given the potential for incoming benefit cuts.

One thing I suggest doing is trying to come up with a rough estimate of what your retirement income needs might look like on an annual basis. Multiply that sum by at least 25, and then use some online calculators to see how much money you’d need to sock away each year to get to that goal.

In the course of running those numbers, don’t factor in Social Security. And the reason I’m saying this isn’t because I’m worried that the program is going away completely. That’s not the case at all.

Rather, it’s because if you’re able to get to a place where you can retire on your savings alone, you won’t have to stress about Social Security cuts. Any income you get from the program is extra money you can use for leisure purposes, as opposed to needing that money to make your car payments or put food on the table.

Boosting my savings has really helped lower my stress in the context of gearing up for less Social Security. And while I’m not happy about the idea of benefit cuts, I can at least say with relative confidence that I don’t expect them to destroy my retirement by any means. Push yourself to save as much as you can so that you’re able to say the same.

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