The Average Social Security Check Could Shrink by $458 in Just Six Years

Social Security’s Trustees have been sounding warnings for years that the program is facing a major financial crisis. Their latest report highlights just how imminent that funding crunch is.

Based on the Trustees’ latest projections, Social Security’s Old-Age and Survivors Insurance Trust Fund will be depleted by 2032. At that point, the program will only be in a position to pay 78% of scheduled retirement benefits.

Let’s let that sink in for a minute.

It’s true that Social Security is just bonus money for some retirees. But a good 44% of older Americans rely on those benefits for all of their retirement income, reports the Senior Citizens League.

The average Social Security retirement benefit paid in April was $2,081. If a 22% cut arrives, it could shrink the typical monthly check by about $458. If that’s a pay cut you can’t afford, the time to take action is now.

How to prepare for Social Security cuts

If you’re already retired, you might assume you don’t have many options for building savings and boosting your finances. But you may have more leeway to earn money than expected.

Going back to work may not be feasible if it means having to be on your feet all day or spending hours every afternoon hunched over a computer. But thanks to the gig economy, you may be able to work flexibly and in a role that doesn’t seem like such a chore. That could mean monetizing a hobby, teaching an instrument you know well, or getting behind the wheel and shuttling passengers around town.

If working isn’t on the table, another option may be downsizing and/or turning your home into an income stream.

The median amount of home equity held by senior homeowners ages 65 and older is $250,000, according to the Joint Center for Housing Studies of Harvard University.

If you can pocket a chunk of equity by downsizing into a smaller home, you can invest that money in assets that pay you on a regular basis. That income could then supplement your Social Security checks, especially if you load up on assets like bonds and dividend stocks.

If downsizing isn’t feasible, renting out a room in your home for income might be. You can even get creative and look into renting out a parking space in your driveway or a storage closet in your basement if a more conventional arrangement won’t work.

Social Security cuts aren’t set in stone

The Social Security Trustees’ latest update is scary, especially when we put it in the context of a potential $458 loss in monthly income. But one important thing to remember is that lawmakers could still find ways to prevent Social Security from having to cut benefits broadly.

In fact, this isn’t the first time Social Security has faced a financial crisis in its history. And if it’s any consolation, lawmakers have never allowed Social Security to cut benefits before.

It’s best to plan for Social Security cuts in case benefits don’t end up being payable in full. But planning does not have to equate with panic.

And even if you’re convinced that Social Security won’t cut benefits, if those monthly checks are your main source of income and you don’t have much wiggle room without them, it could pay to look at working part-time, downsizing, or turning your home into an income stream. It never hurts to have access to extra cash in retirement, regardless of what Social Security’s financial situation looks like.