The Social Security Trust funds are decreasing, which might have negative consequences for both present and future program recipients. Social Security is funded by two sources: employee payroll taxes and monies from Old-Age and Survivors Insurance (OASI). Because payroll taxes alone cannot finance the program’s payouts, the OASI fund fills the gap.
However, this fund has an expiration date. According to Social Security Administration figures, the fund will be emptied by 2033, less than ten years from now; when combined with the other fund in charge of benefits, the Disability Insurance (DI) Trust Fund, the deadline is extended to 2035. This is not the first time the program has been under water and required Congressional assistance to remain operational, but the deadline for the cuts is nearing, and no solution is in sight.
This is bad news for people who currently rely on the program or expect to do so in the future because, without this money, an increasing number of Americans could fall into poverty. The greatest thing future retirees can do is not wait for lawmakers to resolve the issue, but rather plan ahead of time to ensure as much independence from public finances as feasible.
How to Prepare If You’re Still Working
For individuals who are still working and are not reliant on a fixed income to exist, the benefit is significant and should not be underestimated. Knowing you have a few years to prepare may encourage you to redraw your budget and dedicate a larger portion to savings in order to bridge the gap between planned money and the reality of what lies ahead.
To that purpose, the Internal Revenue Service (IRS) has implemented catch-up contributions, which allow employees over the age of 50 to increase their savings potential in 401(k) or IRA accounts. Investing in reliable portfolios and increasing personal savings will be the keys to a secure and enjoyable retirement.
If you are still in employment, you will have the opportunity to examine your retirement plans. For example, you may have hoped to retire at the age of 62, but if your resources do not allow for it, you have time to pivot and wait a little longer. Even though 62 is the oldest age at which you can get Social Security benefits, the amount is insufficient for most families to live on, especially when medical expenditures are factored in, so waiting until Medicare benefits begin may be a good choice.
What to do if you’ve already retired and rely on Social Security?
Retirees have fewer options, but this does not mean they are powerless to better their condition. Joining the gig economy is one of the simplest ways for able-bodied retirees to supplement their income. This could help them to create a nest egg in case cuts occur. If they started right away, they would have ten years to save money.
Relocating to another region of the country where Social Security payments are more generous is another option; while leaving friends and family behind is difficult, individuals who live in high-cost areas will be amazed by the change in lifestyle. The greatest thing retirees can do is consider their options, balance their budget, and take a serious look at their finances. This will assist them in determining the steps they will need to take to ensure that benefit cuts have no negative consequences for them.
