As early as 2033, Social Security benefits may be cut by as much as 23% without Congressional intervention.
This is due to the way that Social Security is structured. Program rules require money to come from within Social Security itself.
Since the Trust Fund is estimated to dry up by 2033, ongoing benefits must then be paid strictly from incoming payroll taxes.
This alone is not enough to fund benefits in full, which results in the estimated 23% drop in payouts.
While Congress has a number of ways to increase funding for Social Security, few of those are desirable.
One option, for example, is to raise payroll taxes from 12.4% to 17.3%. Another is to extend the retirement age.
But there’s a chance that any proposed fix is too little too late- or that there are no changes made at all. In either case, a cut in benefits will be coming at some point.
Whatever changes the Social Security Administration makes to the program are beyond your control. But there are two things you can do to boost your future benefit as high as possible, perhaps even enough to overcome any cuts. This is because the SSA uses just two factors to calculate your benefit amount: your income and your retirement age.
The first component, your income, is based on your highest 35 earning years only. If you have worked fewer than 35 years, each year you are short will count as no income for purposes of calculating your Social Security payout. In order to counteract any future cuts, you’ll want to earn as much as you can for at least 35 years.
The second component, your retirement age, also plays a large role in how much you’ll receive. Although “full retirement age” for most workers is now 67, you can file for benefits as early as age 62. But you’ll receive as much as 30% less than you would at your full retirement age.
If you can postpone filing for benefits until age 70, your benefit will increase by a significant 8% for each year between 67 and 70. In other words, at age 70 your benefit will be 24% more than it would be at your full retirement age.
Many workers can’t afford to wait until age 70 to file for benefits; but, if you’re looking for a way to increase your payout that’s in your control, you’ll want to delay claiming those checks for as long as possible.