Disregarding Social Security Reductions: Here's My Alternative Strategy
In the face of projected Social Security benefit cuts, one individual is taking a proactive stance to secure their retirement savings.
According to recent announcements by the Social Security Trustees, the Old-Age and Survivors Insurance (OASI) trust fund is expected to run dry in 2033, with only 77% of scheduled benefits payable at that time [1]. If the OASI and Disability Insurance trust funds are combined, the situation is slightly better, with benefits able to be paid in full until 2034, but still only 81% of benefits expected to be payable after that [2].
Rather than worrying about potential cuts, this writer is focusing on building their savings as a way to mitigate the impact. They are allocating a lot of their extra money to retirement savings, investing in a diverse portfolio consisting of growth stocks, dividend stocks, real estate investment trusts, and ETFs [3].
The writer is also continuously reassessing their investment strategy to ensure it's working for them. They frequently check up on their investments and rebalance as needed.
In addition to building their savings, the writer has read up on different Social Security filing strategies. They believe that by focusing on boosting retirement savings, investing wisely, and expanding their knowledge of Social Security, they can make potential cuts less of a concern for them.
The writer advises others in a similar situation to take control of their financial situation. Instead of worrying about Social Security cuts, those who are still working should focus on diversifying income sources, increasing personal savings, delaying retirement benefits, and planning for reduced cash flow.
Specific strategies include building additional retirement savings outside of Social Security, such as contributing to IRAs, 401(k)s, or other investment accounts [4]. The writer also suggests considering delaying Social Security claiming age beyond the full retirement age when possible, as this can increase monthly benefits and partially counteract cuts [1].
Budgeting realistically for a 20–23% reduction in monthly Social Security income is also essential, as projected if the trust fund depletes by 2032–33 without Congressional intervention [1][2][4]. The writer also recommends exploring additional sources of income, such as part-time work or annuities, to supplement Social Security.
Monitoring legislative developments is also important, as Congress may intervene before cuts occur. However, the writer acknowledges that conservative planning assumes cuts could happen.
Managing healthcare costs prudently is another key strategy. Since Medicare hospital payments could also face cuts, adding financial strain to retirees, reducing debt and necessary expenses pre-retirement can help lessen vulnerability to decreased benefits [2].
Given projections that benefit cuts could be around 20% starting in 2025 or up to 23% by 2033, proactive financial planning is essential to maintain stability after retirement. The underlying causes include a falling worker-to-beneficiary ratio and reduced revenue from payroll taxes [1][4]. While policymakers may act to prevent the cuts, preparing for them conservatively is prudent [2].
Despite their focus on building their retirement savings, the writer has not mentioned any specific solutions or strategies that lawmakers might use to avoid Social Security cuts. However, their approach to personal finance demonstrates a commitment to taking control of their financial future and preparing for potential challenges.
[1] Social Security Administration. (2021). The 2021 OASDI Trustees Report. Retrieved from www.ssa.gov/oact/tr/2021/index.html
[2] Congressional Budget Office. (2021). Social Security: An Overview. Retrieved from www.cbo.gov/publication/56056
[3] IRS. (2022). Retirement Plans. Retrieved from www.irs.gov/retirement-plans
[4] AARP. (2021). Social Security: What You Need to Know. Retrieved from www.aarp.org/retirement/social-security/info-2021/social-security-basics.html
- Recognizing the potential cuts in Social Security benefits, the writer is investing a significant amount of their money in personal-finance vehicles like growth stocks, dividend stocks, real estate investment trusts, and ETFs for retirement savings.
- To secure their future income, the individual is also continually reassessing their investment strategy, delaying Social Security claiming age when possible, and budgeting for a potential 20–23% reduction in Social Security income.
- In light of projected Social Security benefit cuts, the writer advocates for others to take control of their financial situation by diversifying income sources, increasing personal savings, planning for reduced cash flow, and monitoring legislative developments to manage potential challenges.
