Social Security's Latest Trustees Report Has a Huge Silver Lining for Retirees

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The news might seem dire at first, but it’s important to dig deeper.

Millions of seniors today collect a monthly benefit from Social Security. Because of this, it’s important for pre- and current retirees alike to keep an eye on the program’s financial situation.

Each year, the Social Security Trustees produce a lengthy report outlining the state of the program’s finances. And this year’s Trustees Report confirms that Social Security is indeed facing its fair share of financial woes. But while the report generally paints a pretty bleak picture, there’s a silver lining to take comfort in.

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The news isn’t as bad as it’s been in the past

Social Security’s primary revenue source is payroll taxes. But a shrinking workforce in the coming years could strip the program of much-needed funding.

Social Security has trust funds it can dip into to keep up with scheduled benefits even as its revenue declines. But once those trust funds run dry, Social Security may have no choice but to implement broad benefit cuts.

You may be thinking, “Well, that sounds like pretty negative news.” Frankly, it’s not so great. But here’s why things aren’t as bleak as they’ve been in the past.

Last year, the Social Security Trustees projected that the program’s combined trust funds would be out of money in 2034. This year, they’ve pushed that date back to 2035. If Social Security takes in more revenue than expected in the coming years, we could see that 2035 timeline pushed back even further.

This year’s Trustees Report also indicates that once Social Security’s trust funds are depleted, the program should be in a position to keep up with 83% of scheduled benefits. That’s still a significant cut at 17%, but a smaller one than previous estimates.

Benefit cuts may not even happen at all

Another important thing to remember is that while Social Security cuts are a possibility in the future, they’re by no means guaranteed. Social Security has faced funding issues in the past, and lawmakers have always ultimately stepped in to prevent benefits from being broadly slashed.

No one in a position of political power wants to be responsible for a widespread poverty crisis among seniors. So an additional silver lining in the latest Trustees Report is that benefit cuts are not a given, and that it’s in the best interest of lawmakers to take steps to prevent those reductions from happening.

Of course, some of the solutions at lawmakers’ disposal might force you to make changes to your retirement or financial plans. Currently, people born in 1960 or later are eligible for their Social Security benefits in full at age 67, otherwise known as full retirement age. Lawmakers may decide to push full retirement age back to 68 or 69 to help Social Security preserve funds and keep up with benefits. But if that rule comes to be, it may require you to work longer.

Lawmakers may also decide to raise the Social Security tax rate, which currently sits at 12.4% and is split evenly at 6.2% between workers and their employers (self-employed individuals pay the whole 12.4%). If that rate goes up to pump more money into Social Security, it’ll result in less take-home pay, which may require an adjustment to spending.

But either way, know that Social Security cuts are not guaranteed to happen. It’s a good idea to prepare for them by boosting your savings and, if you’re a current retiree, cutting expenses where it’s reasonable to do so. But it’s not a complete given that in 11 years’ time, or at some point in the future, your Social Security check is going to shrink.