What’s Causing the Cut Before It Starts!
Social Security is having a money problem because of huge changes in who works and who collects benefits. More people are over fifty and fewer babies are being born, which means fewer workers are sharing the load of supporting a growing number of retirees. Presently, the average monthly check is $2,002.39, but unless lawmakers step in, people still years away from retirement could get a much smaller check.
The program’s one-time 2.5% cost-of-living adjustment (COLA) in 2025 gives today’s retirees a bit of a cushion, but it does not fix the program’s long-term money woes. That increase just helps to keep monthly payments from losing ground to rising prices; it does not stop benefits from being cut for the generation now in school and just beginning to save for retirement.
Timeline of Impact: Who Faces the Steepest Cuts!
The hardest chore cuts depend on how close you are to the finish line. People already collecting benefits or about to retire will likely see only tiny tweaks. On the flip side, millennials and anyone in Generation Z might take the whole hit if the money gap isn’t fixed.
Right now, picture a thirty-something making the average paycheck. They’d lose about $555 a month, which is 28% of what they could have gotten at full retirement age. That level of drop could push folks to keep their job extra years or to plan on living with a whole lot less money when they finally stop working.
The Changing Retirement Landscape!
Planning a retirement is getting trickier by the year. For you, if you were born in 1959, full retirement age just bumped up to 66 years and 10 months. Birth years after 1959 see that age creep all the way to 67. If you bolt at 62, the bite is harsher than before—about 30% smaller than the check you’d get if you wait till the full age.
People who put off starting their Social Security benefits usually end up with a lot more money. Waiting one extra year after your full retirement age gives your monthly check a nice boost of 8%—and this keeps happening every year until you turn 70. Because of this, someone who waits until age 70 could see their maximum monthly benefit in 2025 grow all the way to $5,108. That’s a big payday if you can hang on a bit longer.
Closing the Money Gap
With future benefits likely to shrink, folks planning to retire can’t stick to the old playbook. First, pumping up your savings—especially in accounts like 401(k)s and IRAs that give you a tax break—should be job one. Some people might have to stick with work a few extra years, or switch to a part-time job that fits in with their bucket-list travel plans.
Advisors are now suggesting we look at Social Security as one slice, not the whole pie. Think of it as a base that you then layer on with savings, dividend and interest income, annuities, or even rental income. The more pie slices you create, the less impact one slim slice can have on your overall meal.
That $555 less in monthly Social Security money, while abstract to some, is a jarring reminder that retirement planning is a must—not a maybe. Political fixes may be lingering in the halls of Congress, but whether it’s piling on the savings, stretching work years, or piecing together different income strategies, the power to make a secure retirement is squarely in each of us.
