Key Points
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Many retirees rely on Social Security to cover their living expenses.
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The program is facing two issues that could negatively affect seniors’ finances.
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The best way to cope is to become less reliant on Social Security for retirement income.
It’s pretty common for people to retire and start collecting Social Security. There are many older Americans today who get the majority of their retirement income from those monthly benefits.
However, there’s a problem. Social Security is facing a couple of serious issues that could negatively affect retirees in the near term. Here are two that all seniors should know about.
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1. Benefit cuts
The majority of Social Security’s revenue comes from payroll taxes — the ones people complain often about having to pay. But in the coming years, that particular revenue stream is expected to shrink as older Americans exit the workforce. While younger workers will, of course, be entering the labor force, the rate of replacement workers won’t be large enough to compensate for those who are retiring.
Social Security can use the money in its trust funds to keep up with scheduled benefits for a period of time. However, the program’s combined trust funds are expected to run dry in 2034. At that point, only 81% of benefits are expected to be payable, per the most recent update from the program’s Trustees. That’s a pretty significant pay cut for retirees to bear.
2. A stingy 2026 COLA
It’s too soon to predict what 2026’s Social Security cost-of-living adjustment (COLA) is going to amount to, since that COLA is based on third-quarter inflation data. But initial estimates from the Senior Citizens League, an advocacy group, are calling for a 2.6% COLA in 2026. That’s barely a notch above 2025’s Social Security COLA, which came in at just 2.5%.
As it is, many retirees are having a hard time keeping up with their expenses. If next year’s COLA is minimal, it could put many seniors in a tough spot.
It’s also worth noting that Social Security COLAs often do a poor job of helping retirees cope with inflation, despite the fact that they’re designed to do just that. So it’s not just that 2026’s COLA could be too low for comfort — it’s that future COLAs are also likely to disappoint.
Don’t be too reliant on Social Security
If you’re a retiree who depends heavily on Social Security for income, benefit cuts and a stingy COLA could hurt you tremendously. The solution? Try to reduce that reliance.
First, examine your bills and see if there’s any room to cut back on spending. Next, explore your options for working part-time.
From there, consider more drastic changes if the first two aren’t viable or won’t cut it. That could mean downsizing out of your home or relocating to a part of the country where Social Security benefits are more easily stretched.
Even though benefit cuts may be avoidable and next year’s COLA could end up coming in higher than 2.6%, it’s best to either have income outside of Social Security or low enough expenses that you’re able to get by on those monthly checks. If you’re feeling shaky about your retirement finances because of the factors above, the sooner you take action, the better.
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