The title to this post is a little snarky as latest report from the trustees of Social Security and Medicare is out and it reiterates Social Security running out of money in the mid-2030's at which time, everything else being equal, will require a 23% reduction. The date and the percentage to be cut moves around a little bit every year but for now, 2034 and 23%.
We've been having this same conversation since I don't know when. The way in which Social Security is operated, payouts would have to be cut as a matter of law. Other pools of money cannot pay SS benefits. My understanding is that at a very high level, preventing cuts to payouts would require that the relevant laws be changed.
Here news accounts about this from the Washington Post, Bloomberg, NY Times and Yahoo. Between the four articles, there were theories that tariff induced price inflation would put further strain on the program because of larger cost of living adjustments. Another potential strain would be the deportation of illegal immigrants paying in but not taking out. Per a Google search a couple of months ago, it was something like low to mid single digit percentage of the population participate in this manner.
Before getting any further into this, there is no way that some sort of benefit cut should catch anyone off guard. I really don't know how many years we've been talking about this outcome and it is still eight or nine years away. I would also repeat from previous posts that thinking in terms of fair or unfair is irrelevant. Yes cuts of any sort would be unfair but other than members of the legislature, none of us are going to impact whether there are cuts, who will have their benefit cut or who will not. To focus on the unfairness is to worry about things beyond our control.
The focus here has always been trying to create streams of income out of some sort of activity or endeavor that you enjoy, know something about or a combo of the two. If you have to work beyond the typical retirement age or beyond the age you hoped to retire, what is the one job or the one type of work you do not want to do, that you would hate to do, that would be depressing or defeating?
If it looks like a cut to Social Security is coming, someone who hasn't worked on mitigating that outcome they least want has a high chance of ending up in that lousy, for them, situation.
The approach of cultivating long term interests into a possible income stream does a couple of things. First, the obvious benefit of a better chance for avoiding a bad outcome like expecting $4000/mo from SS and only getting $3000. It also makes for a more interesting life. My life is far more interesting for my fire department involvement and in the last few years with the Del E Webb Foundation. I've already monetized the fire department work a couple of times with incident management work and could do more if I needed to but I've dialed that back for now. Starting next year, I will get a small stipend as a board member for Del E Webb. Stipend is a good word, it's not a big income but would help if things ever get tough for us.
I've been talking about the fire stuff for many years which speaks to the point of taking a long runway to cultivate post retirement income streams. If I ever have to rely on these, it will be work/activity that I enjoy not a job that I'd have to take out of desperation.
As far as what might actually happen to Social Security, I've said before that I don't believe anyone born before a certain year, I guessed 1975, will have their payouts cut. There's some logic there but it could be incorrect. Somewhere, I saw the idea that as the 78 million baby boomers age out, that could provide some relief. Gen-X has about 65 million, both numbers per Google.
In the past, I have floated the idea that people should expect means testing or maybe phasing out the spousal benefit. In that scenario a non-working spouse would get the survivor benefit but not spousal benefit while the working spouse was alive.
If they do anything, it will be unfair to someone, maybe everyone. Languishing in the unfairness solves nothing.
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