Are Social Security Cuts Really Going To Affect You?

If you’re a member of the workforce today, you probably keep hearing about the importance of saving well for retirement. The goal is to make sure that once your career comes to an end, you have more than just Social Security benefits to live on.

But a lot of retirees today have only those benefits for monthly income. And for people in that boat, the idea of Social Security cuts can be extremely scary.

Unfortunately, the concept of Social Security cuts isn’t a far-fetched notion. It’s one that the program’s Trustees are sounding new warnings about.

But should you assume that you’re going to be impacted by Social Security cuts? Not necessarily.

Why the threat of Social Security cuts exists

Social Security gets most of its revenue from payroll taxes. But in the coming years, the program is expected to owe more in benefits than it receives in revenue as the workforce shrinks.

Social Security can use the money in its trust funds to keep up with benefit payments for a period of time. But once the program’s trust funds are out of money, the potential for cuts will exist.

The most recent Social Security Trustees report says that Social Security’s combined trust funds will be depleted in 2034. At that point, the program is only expected to be able to cover 81% of benefits, which means Social Security recipients could see their monthly checks whittled down quite substantially. However, that does not mean that Social Security cuts are set in stone.

Why you may not need to worry (as much) about Social Security cuts

The idea of not getting your complete Social Security check each month can be scary. This holds true whether you’re a retiree who lives off of that income already, or if you’re a working person who’s expecting to need that money later in life.

The reason you may not need to stress quite so much about Social Security cuts is simple. This isn’t the first time Social Security has faced a financial shortfall. In the past, though, lawmakers have never allowed the program to cut benefits. And so there’s a good chance they’ll manage to come up with a solution to prevent benefit cuts this time around, too.

What will that solution look like? That’s not so clear. Some options include raising payroll taxes and pushing back full retirement age, which is when people can claim their Social Security benefits without a reduction. There may be new solutions introduced in the coming years, too.

All told, though, lawmakers know that if current retirees were to lose almost one-fifth of their benefits, it would result in a widespread crisis. That’s something they’re no doubt invested in trying to prevent.

Does this mean that you should be complacent about Social Security cuts? Not exactly. They are still possible, and it’s a good idea to save independently for retirement so you’re less reliant on Social Security for income regardless.

However, you also don’t necessarily need to panic about Social Security cuts. Lawmakers have different options to prevent them from happening. And while the clock is ticking down, there’s still time to come up with a fix.