Social Security’s Day of Reckoning Is Getting Closer. Here’s What Retirees Need to Know.

Benefits may not be payable in full for the long haul. Millions of seniors today collect a monthly benefit from Social Security. And for many, that benefit serves as their primary source of income. Some seniors, in fact, can only pay their bills because they’re eligible for Social Security, and without those benefits, they’d essentially be unable to get by. But Social Security is facing a major financial shortfall that could impact the program’s ability to pay benefits in a serious way. And that’s something every retiree should have on their radar.

Benefit cuts may be coming

Let’s get one thing out of the way: Social Security is not completely running out of money. That actually can’t happen because Social Security is primarily funded by payroll-tax revenue. As long as we have an active labor force, money will continue to roll into Social Security. However, in the coming years, the labor force is expected to shrink as baby boomers enter retirement. As that happens, Social Security will have less payroll tax to collect, resulting in a financial shortfall. Social Security can tap its trust funds to make up for that shortfall for a limited period of time. But once those trust funds run dry, benefit cuts may be unavoidable. And given that we’re about 10 years away from the program’s trust funds becoming depleted, as per the most recent projections, it’s time for lawmakers to get serious about implementing solutions to avoid benefit cuts. Unfortunately, though, while lawmakers have been trying to introduce such solutions, nothing official has come through. And with the clock ticking down, it’s time for seniors to face the unfortunate reality that the source of income they’ve long relied on may be headed for a serious reduction.

How to gear up for Social Security cuts

The idea of losing out on some of your Social Security income may be downright devastating, especially if those benefits currently serve as your primary or only source of retirement income. But rather than ignore the problem, one of the first things you should do is examine your spending and see if there’s room to cut back anywhere. That could, for example, mean selling your home and buying one that’s much less expensive to maintain with lower property taxes. Another step worth taking in the near term is trying to earn money from a job. The younger you are, the more likely you’ll have the energy to work in some capacity. These days, seniors have lots of flexibility, thanks to the thriving gig economy. If you’re beyond the days of working a desk job and don’t ever wish to go back there, you don’t have to. You could teach an instrument, drive for a ride-hailing service, or work just about any gig you have the skills and patience for. It’s in lawmakers’ best interest to take steps to avoid Social Security cuts. But we can’t count on that happening. So for now, assume that a reduction in your Social Security income is in your future. If things work out differently, you’ll have that much more of a financial cushion. But definitely take steps now to conserve cash and shore up your savings, just in case your monthly benefits end up shrinking in a very big way.