Social Security is running out. Here's how to deal

Hanna Horvath Headshot

By

Hanna Horvath, CFP®

Hanna Horvath, CFP®

CERTIFIED FINANCIAL PLANNER™ & former Managing Editor, Growth

Hanna Horvath is a CERTIFIED FINANCIAL PLANNER™ and former managing editor for growth at Policygenius. She helped produce the Easy Money newsletter. She passed her exam to become a CERTIFIED FINANCIAL PLANNER™ in November 2020.

Hanna's work has appeared in NBC News, Business Insider and Inc. Magazine. She is regularly quoted in top media outlets, including CNBC, Best Company and HerMoney. She has also appeared on the Money Moolala podcast and All's Fair podcast.

Prior to Policygenius, Hanna wrote for KNBC in Los Angeles and WNBC in New York. When she isn't writing, she's (often) running, (usually) cooking and (sometimes) doing photography.

Published May 13, 2019|2 min read

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It may be time to start planning on retiring without Social Security.

The Social Security Board of Trustees projects that Social Security’s trust fund reserves will run out by 2035. If the reserves are depleted, tax income will only be able to fund 80% of scheduled benefits starting in 2035. Americans who are eligible for Social Security in 2035 may only have access to a portion of their benefits, according to the report.

The Social Security combined trust funds are made up of the Old-Age and Survivors Insurance Trust Fund, which pays out retirement benefits, and the Disability Insurance Trust Fund, which pays out disability benefits. (You can learn more about them here.)

“A 25% drop is significant especially if it is your primary source of income,” said Devin Pope, certified financial planner at Albion Financial Group.

Total Social Security benefits are expected to exceed the program’s cost in 2020, as fewer people are putting money into Social Security through taxes and more are taking it out through benefits. Some experts like Pope expect government changes to be made to the program before 2035 that will prevent the funds from becoming exhausted. But you should still prepare for a worst-case scenario.

How to prepare for a Social Security drop

If you’re still working and are worried about the potential reduction, start making adjustments now. First check to see how much is in your Social Security. You can check online.

Practice spending only 75% of your paycheck. Save the remaining 25% and for emergencies and other expenses, said Pope. Also consider putting more money into your 401(k). In 2019, the IRS allows those up to age 50 to contribute as much as $19,000 to a 401(k).

“This will help adjust your lifestyle to what your income could be,” he said.

Adopting smart investing strategies can help grow your nest egg. Here’s a guide on how to get started with investing.

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Image: Dominik Lange