Impending Cuts to Social Security: What retirees need to know
The concern centers on the Social Security Trust Fund, which is being used up over time. This is happening because the U.S. population is getting older.
More people are collecting benefits, and fewer workers are paying into the system compared with past decades. People are also living longer, which means benefits are paid out for more years.
If the trust fund’s reserves run out, Social Security would still take in money from payroll taxes, but it would only be able to pay benefits using that incoming revenue. Under the law, that could lead to automatic benefit cuts for retirees, survivors, and people with disabilities.
For many households, losing hundreds of dollars each month could make it harder to cover rising costs such as housing, healthcare, utilities, and food.
The impact could be especially severe for lower-income retirees who rely on Social Security as their main source of income and have little or no additional savings.
Middle-income retirees could also face problems if they planned their retirement budgets based on today’s expected benefit levels.
The possible cuts are not caused by one new policy. Instead, they reflect years of delayed action in Washington, even though the funding issues have been widely known. Lawmakers have several ways they could respond, such as:
- Raising payroll taxes
- Changing the retirement age
- Adjusting how benefits are calculated
- Raising the cap on income that is taxed for Social Security
Each option has political downsides, which have made it difficult for Congress to agree on a solution.
Financial experts say the uncertainty is a reason for people nearing retirement to review their plans, including reducing debt, building emergency savings, and creating additional income sources where possible.
While the $460 figure represents a worst-case estimate, the overall warning is clear: without changes from Congress, future Social Security payments could be smaller, and retirement may be less financially secure for many Americans.
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