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Yahoo
6 days ago
- Business
- Yahoo
Social Security benefits could face cuts by 2033. Here's how to plan for the worst-case scenario.
Listen and subscribe to Decoding Retirement on Apple Podcasts, Spotify, or wherever you find your favorite podcasts. The Social Security trust fund could be depleted by early 2033, triggering 23% across-the-board benefit cuts for all recipients. This sobering reality from the latest trustees report has retirement experts sounding the alarm about the need for immediate action and creative solutions. Marcia Mantell, president of Mantell Retirement Consulting, recently discussed the implications of the 2025 Social Security trustees report on the "Decoding Retirement" podcast, providing actionable advice for Americans facing this potential crisis. The trustees report, released in mid-June, painted a concerning picture of Social Security's financial health. While the depletion date for the Old Age and Survivors Insurance (OASI) fund remained at 2033 — consistent with last year's projection — the timeline has actually accelerated. "Instead of the end of 2033 depleting the reserve account, it's now the beginning of 2033," Mantell explained. "So it's a problem." The acceleration stems from several factors, including the Social Security Fairness Act, which restored benefits to previously excluded government workers; declining fertility rates; and a worsening worker-to-retiree ratio. Currently, fewer than three workers support each beneficiary, down from more than five workers per beneficiary in 1960. The crisis extends beyond Social Security. The Medicare Part A trust fund, which covers hospital insurance, is now projected to be depleted by 2033 — three years earlier than previously forecast. "I was surprised, though, on the Medicare side that the Part A ... is projected to be depleted," Mantell said. "The reserve account [is] to be depleted three years earlier, also in 2033." She noted that healthcare expenses typically rise at about twice the rate of general inflation, making the Medicare trust fund particularly vulnerable. However, she expressed optimism about Medicare's Innovation Center, which "continually look[s] for innovative ways to help with both quality of care and pricing." The $20,000 question To illustrate the potential devastation, Mantell highlighted some scenarios for different income levels. For instance, a couple where both spouses earned high wages throughout their careers and delayed claiming until age 70 would see an annual benefit of $89,000 before cuts. But after a 23% reduction, they would receive an annual benefit of $68,000 — an annual loss of $20,000. "It's bad enough that your guaranteed benefit from Social Security would be cut," Mantell said. "But my bigger issue is, where do you get it from? Even if you have a fairly healthy retirement account, do you want to spend an extra $20,000 a year?" For younger workers, the long-term impact is even more staggering. A 20-year-old earning $100,000 today could face a net present value loss of $800,000 over their lifetime if they retire at 70. Net present value represents the current value of a stream of future income, discounted to reflect the time value of money. The potential modification of the Affordable Care Act could compound these problems, with an estimated 8 million people potentially losing ACA coverage and another 8 million facing Medicaid cuts. Mantell describes this as "catastrophic" because it places the entire burden on "regular hardworking consumers to figure this stuff out" while policymakers struggle to find solutions. Actionable strategies for current workers and pre-retirees Given the potential cuts, how should individuals plan for this worst-case scenario? Mantell advised "planning much earlier" and saving more if you can, particularly if you're in your 20s. "That's your best decade to save for retirement," Mantell said. "So get saving, kids. I mean, you've really got to own this." Another tip is to start retirement income planning by age 50 and plan for higher withdrawal rates from retirement accounts to compensate for reduced Social Security. Additionally, you can eliminate zeros from your earnings record by continuing to work or increasing your income. "I believe you can never save enough," Mantell noted. "Saving more is super important. It gives you lots of flexibility, but ... not everyone can do that." For those who cannot increase savings significantly, she emphasized understanding how potential cuts could affect their specific situation. Thinking beyond traditional Social Security solutions Mantell also advocated for innovative policy solutions rather than accepting conventional approaches of simply raising taxes or cutting benefits. "We are not being nearly creative enough when we only offer two choices," Mantell said. "Let's be way more creative." She questioned whether the system could use different benefit calculation formulas — perhaps one for workers in physically demanding jobs who may need to retire early versus those in white-collar positions, or separate formulas based on income levels. The current "straightforward" solutions proposed by the Social Security Administration — raising revenue by one-third or cutting benefits by one-fourth — are what Mantell calls "draconian" and "not tenable for regular normal people." On the Medicare side, Mantell sees promise in existing innovation efforts: "There's also this really cool thing at CMS, the Centers for Medicare and Medicaid Services, called the Innovation Center," she said. "And they continually look for innovative ways to help with both quality of care and pricing. So I would like to think they're [going to] be really busy for the next five to eight years trying to look at new ways to sort of skin this cat." The bottom line The Social Security and Medicare crisis is no longer a distant threat — it's a looming reality requiring immediate attention from both policymakers and individual Americans. While the challenges are significant, they're not insurmountable if addressed with creativity, urgency, and shared responsibility. "We deserve a secure retirement," Mantell said. "We just don't deserve a superrich retirement unless we've done it on our own." For Americans approaching or in retirement, the message is clear: Hope for the best policy outcomes, but plan for the worst-case scenario. The time for complacency has passed, and the time for action is now. Got questions about retirement? Email Robert Powell at yfpodcast@ and we'll answer them in future episodes. Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service. 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Yahoo
14-07-2025
- Business
- Yahoo
Social Security's Financial Outlook Just Got Worse -- but Here's Why You Should Still Wait to Sign Up for Benefits
Social Security's Trustees just delivered some bad news about the state of the program's finances. Benefit cuts may be closer than previously anticipated. Despite an unfavorable outlook, you still shouldn't rush to claim Social Security early. The $23,760 Social Security bonus most retirees completely overlook › Social Security isn't exactly known as a program whose finances are stable. There's been talk of Social Security needing to cut benefits for years. But the program's most recent Trustees Report just delivered some bad news. Social Security's combined trust funds are expected to run dry by 2034. And the OASI (Old-Age and Survivors Insurance) is expected to be depleted by 2033. This means that Social Security cuts could easily be less than a decade away. In light of that, you may be inclined to claim Social Security as early as you can. But here's why you may want to rethink that plan. You're entitled to your Social Security benefits without a reduction if you hold off until full retirement age to file for them. Full retirement age is 67 for anyone born in 1960 or later. However, you're allowed to sign up for Social Security at any point once you turn 62. And you may now be thinking of filing for Social Security at 62 to get your money before benefit cuts arrive. One thing you should know, though, is that benefit cuts aren't guaranteed to happen. Lawmakers have different options they can work with to avoid that unwanted scenario. These include raising full retirement age, increasing the Social Security tax rate, and increasing the amount of wages that are subject to Social Security taxes each year. If you're on the cusp of turning 62, it pays to at least sit tight a bit and see what ideas lawmakers come up with rather than rush to file for benefits right away. Even though lawmakers have been slow to react to the issue of Social Security's impending financial shortfall, this year's Trustees Report might give them the push they need to start prioritizing a solution that stops benefit cuts from happening. You may be inclined to claim Social Security as soon as possible to get ahead of benefit cuts. But if they do happen, and you claim Social Security early, you'll only reduce your benefits even more. Say lawmakers can't prevent Social Security from cutting benefits, and those monthly payments end up decreasing by 20% universally. That's going to deal a blow to your retirement income. But if you claim Social Security at age 62 with a full retirement age of 67, you'll be slashing your benefits by 30% by virtue of that move alone. And then, if broad program cuts happen, you'll be looking at even less money in total. The larger a monthly check you start out with, the less benefit cuts are likely to hurt you. So it could pay to wait until full retirement age to file, or even beyond it. For each year you delay Social Security past that point, up until age 70, your monthly benefits rise 8%. It's pretty clear that Social Security's financial situation isn't rosy. But that doesn't mean claiming benefits early is an optimal solution. But before you commit to doing that, it could pay to see what potential fixes lawmakers come up with. And it definitely pays to run the numbers carefully and understand the financial implications of taking benefits ahead of full retirement age. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Social Security's Financial Outlook Just Got Worse -- but Here's Why You Should Still Wait to Sign Up for Benefits was originally published by The Motley Fool
Yahoo
10-07-2025
- Business
- Yahoo
Social Security Cuts Could Cost You $138K: Here's How Much More You'll Need To Save
If Congress doesn't act soon, millions of Americans could see their Social Security benefits reduced within the next decade. According to the 2025 Trustees Report, the Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100% of total scheduled benefits until 2033, after which point benefits would be cut by 23%. Find Out: Read Next: If benefits are reduced, it will be up to the individual to make up the difference. A 23% cut would require $138,000 in additional savings to generate the same income, based on the widely accepted 4% retirement withdrawal rule, a new PensionBee analysis found. That's a steep ask, especially for those nearing retirement. But the earlier you start preparing, the more manageable it becomes. Here's how the additional $138,000 in required savings breaks down for workers who will be retiring after 2033. The PensionBee analysis broke down how much extra workers of all ages would need to set aside each month to save an additional $138,000 by the time they retire, assuming a retirement age of 67 and 5% investment returns: Age 25: $67/month Age 35: $121/month Age 45: $238/month Age 55: $701/month 'Those nearing retirement are in a worse position to offset cuts, but there are tangible ways to buffer the potential impact,' said Romi Savova, founder and CEO of PensionBee. Learn More: Savova recommended that Americans who are approaching retirement take advantage of catch-up contributions, which allow people ages 50 and over to contribute an extra $7,500 to their 401(k). Starting this year, Secure 2.0 also allows those ages 60 to 63 to make 'super catch-up' contributions of an additional $11,250. 'Some Americans may choose to delay retirement, which gives more time to save, pay down debt and allow investments to grow,' Savova said. 'You can also consider drawing from personal retirement savings first while delaying Social Security benefits, which increases your monthly payout by about 8% for each year you wait past full retirement age until the age of 70.' Whether you're 25 or 55, now is the time to take an active role in your retirement planning. 'If you're not already saving for your retirement, consider this your wake-up call,' Savova said. 'The longer your money is in the market, the less you'll need to contribute to make up for lost benefits, so it really makes sense to save as much — as early — as you can.' It's also important to monitor your retirement accounts regularly to ensure you are staying on track. You may need to make adjustments, such as contributing enough to get your full employer match or even contributing the maximum annual limit if possible. In addition, make sure you rollover your 401(k) account if you switch jobs. 'The system is complicated, and the average person will have 12 jobs in their lifetime, which can mean an equal number of scattered retirement accounts,' Savova said. 'It's your responsibility to ensure every account is tracked and invested wisely. Consolidating accounts into a central home, like an IRA, can make it easier to manage your savings and give you a clearer picture of your progress.' More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 6 Hybrid Vehicles To Stay Away From in Retirement 5 Types of Cars Retirees Should Stay Away From Buying This article originally appeared on Social Security Cuts Could Cost You $138K: Here's How Much More You'll Need To Save Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
09-07-2025
- Business
- Yahoo
Social Security's go-broke date pushed up in new report
The combined trust funds for Social Security are projected to run out in 2034, a year earlier than previously predicted, a board of trustees of the program's accounts said in a new report released Wednesday. The report projected that the program's Old-Age and Survivors Insurance (OASI) fund would be able to cover '100 percent of total scheduled benefits until 2033,' while the Disability Insurance (DI) trust fund is estimated to be able to pay '100 percent of total scheduled benefits through at least 2099.' But when the projections are combined, the resulting fund is estimated to only be able to cover '100 percent of total scheduled benefits until 2034, one year earlier than reported last year.' Once the reserves are depleted, the report estimates the total fund income would be able to pay 81 percent of scheduled benefits. The report said the depletion dates for the funds had advanced by about three-quarters compared with the previous year's projections. The report cited last year's passage of the Social Security Fairness Act as a key factor behind the shift in the funds' projected depletion dates. The bipartisan bill, which former President Biden signed into law in January, repealed two tax rules that proponents say have unfairly reduced benefits for many Americans who also receive government pensions. But many experts sounded the alarm over its expected price tag and raised questions of fairness around the legislation. The new report said on Wednesday that the repeal of the tax rules 'increased projected Social Security benefit levels for some workers, relative to projected benefit levels in last year's report,' while singling out the legislation's impact as 'the primary contributor to the change' in the combined trust fund depletion date this year. Two other factors the board pointed to were the trustees' extension of the 'assumed period of recovery from historically low levels of fertility by 10 years' and its lowering of 'the assumed long-term share of Gross Domestic Product (GDP) that accrues to workers in the form of labor compensation.' Medicare's hospital insurance trust fund is running out of money, and is scheduled to be depleted in 2033, three years earlier than reported last year, according to the program's trustees. The Hospital Insurance (HI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033. At that point, it will only be sufficient to pay 89 percent of total scheduled benefits. The change is due to higher-than-expected spending on hospice and inpatient care in the earlier years of the projection, the report said. Medicare trustees have sounded the alarm on the Hospital Trust Fund for years, though the warnings have mostly been ignored by Congress, as lawmakers view Medicare reforms as a political third rail. The trustees recommended Congress increase the standard payroll tax rate or reduce Medicare spending to address future shortfalls. Nathaniel Weixel contributed. Updated at 5:07 p.m. EDT Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
09-07-2025
- Business
- Yahoo
Cassidy, Kaine propose new funding trust for Social Security
Sens. Bill Cassidy (R-La.) and Tim Kaine (D-Va.) proposed a new method to account for the expected lapse in the Social Security Trust Fund. A June report from the program's Old-Age and Survivors Insurance (OASI) fund would only be able to cover '100 percent of total scheduled benefits until 2033,' while the Disability Insurance (DI) trust fund is estimated to be able to pay '100 percent of total scheduled benefits through at least 2099.' However, Cassidy and Kaine say trust fund investments should be diversified in order to maintain the available Social Security benefits. 'We propose creating an additional investment fund — in parallel to the trust fund, not replacing it — that would be invested in stocks, bonds and other investments that generate a higher rate of return, helping keep the program from running dry,' Cassidy and Kaine wrote in a Tuesday op-ed for The Washington Post. The two estimate that it would take a $1.5 trillion up-front investment into the fund to get it going, while suggesting the Treasury fund the accounts for 75 years. 'The Treasury would temporarily shoulder the burden of providing benefits to Social Security beneficiaries — but when the new fund's 75 years are up, it would pay the Treasury back and supplement payroll taxes to help fill the future gap,' the senators said. Cassidy and Kaine said their program would work, citing the National Railroad Retirement Investment Trust, which was created by Congress in 2001 and successfully provided retirement benefit payouts for railroad workers. 'The trust has remained firmly in the black, with returns even exceeding expectations at some points and with payments consistently remaining reliable and on schedule,' the lawmakers said. 'Our proposal is also consistent with virtually every other pension plan — state and private — currently operating in our country, and it matches the strategy most nations use to fund their retirement programs,' they added. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
