If you've been reading up on Social Security, you've probably heard that the program's latest Trustees Report wasn't too encouraging. That report confirmed that Social Security is looking at a financial shortfall as older workers exit the workforce in droves, stripping the program of much-needed payroll tax revenue.
Social Security has trust funds it can use to keep up with scheduled benefits for a period of time. But once those trust funds run dry, benefit cuts will be on the table.
The timing of that isn't so far off. Using the depletion date of the program's combined trust funds, the latest Trustee estimate has benefit cuts happening as early as 2035.
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Of course, benefit cuts aren't a given. There's a chance lawmakers will find a way to prevent them like they've done before.
But I can't bank on that happening. I think a smarter move is to assume that I won't get as much Social Security as I'm currently entitled to. But I'm also taking steps to ensure that a smaller monthly Social Security check isn't a problem.
My game plan
Since I have the privilege of writing about retirement planning for a living, I know a bit about it. I've known for a long time that relying heavily on Social Security for retirement income is a less-than-stellar plan, even if benefit cuts are taken out of the equation.
But given the potential for those cuts and the generally unpredictable future of Social Security, my retirement game plan is simple: I'm aiming to have access to enough income that I can retire without Social Security at all.
Since the program isn't at risk of disappearing completely, one can argue that I'm going to a bit of an extreme. But the way I see it, I'd rather write off Social Security and save enough to function without it. That way, any monthly benefit I'll collect will be extra money I can use for whatever purpose I please, whether it's to rescue dogs (can't really get enough of that) or take classes on topics that interest me.
But let's get back to the savings bit for a minute. In a nutshell, I'm saving as much of my income as I can after paying my essential expenses. I'm currently housing my savings jointly in a solo 401(k) and a brokerage account.
The reason I don't have all of my money in the 401(k) is that there can be penalties for withdrawing funds before turning 59 1/2. I'm hoping to keep working well beyond that age but, well, you never know.
I also have a small health savings account (HSA) I hope to carry into retirement and use to cover healthcare expenses. I could spend the money now, but I'm better off reserving it for later and letting the money grow tax-free.
In addition, I'm trying to set myself up to continue working in retirement to some degree. I feel that this is necessary not just for the financial benefit, but for the sake of alleviating boredom. (I'm admittedly not a "chill out on the couch watching TV for hours on end" kind of person.)
My current career -- writing -- will hopefully lend to that if robots don't take over my job. But I'm also exploring backup careers, such as getting my license to become a Certified Financial Planner.
Don't let Social Security cuts ruin your retirement
The idea of getting less money out of Social Security than expected can be upsetting, frustrating, and downright scary. That's why I'm trying to take Social Security out of my personal retirement equation. And doing the same might be a good thing for your financial and mental health.
If you still have a good number of working years ahead of you, aim to ramp up your retirement plan contributions so you'll be less reliant on Social Security down the line. You may also want to sit down with a financial advisor to map out a personal savings plan that accounts for Social Security cuts.
Of course, lawmakers may very well come to the rescue and make it so Social Security can continue paying benefits in full. And if that comes to be, it won't change my strategy. I'm aiming to be able to support myself without Social Security. If I can pull that off, any monthly benefit I'll collect is apt to make my retirement that much more rewarding.
