If you think Social Security will be enough to live on in retirement, you need a Plan B.
Shark Tank investor Kevin O’Leary has been blunt on this point: Social Security was never designed to serve as a sole source of retirement income. With the average monthly benefit sitting at roughly $2,026 in 2026, that reality is hard to argue. And the program’s long-term outlook has grown more precarious, not less, making a backup plan more urgent than ever.
Social Security May Run Out Sooner Than Expected
The June 2026 Social Security and Medicare Trustees Report delivered a sobering update. The Old-Age and Survivors Insurance (OASI) trust fund, one of the two funds Social Security draws on to pay retirement benefits, is now projected to run dry in late 2032, three months earlier than the first-quarter 2033 estimate in the prior year’s report. At that point, the program would be able to pay only 78% of scheduled retirement benefits, amounting to a roughly 22% cut for retirees.
The accelerated timeline is partly a consequence of the “One Big Beautiful Bill Act” signed into law in 2025, which Social Security’s chief actuary said would have “material effects” on the financial status of the trust funds by altering the income taxation of benefits. The Congressional Budget Office takes an even grimmer view, projecting that depletion could trigger an immediate 28% across-the-board cut in 2033, the first full year after exhaustion.
Inflation is adding pressure from another direction. Current estimates for the 2027 Cost-of-Living Adjustment (COLA) range from 3.8% to as high as 4.7%, driven by rising energy and food prices. That is a meaningful jump from the 2.8% COLA applied to the roughly 75 million beneficiaries in 2026, and it increases the program’s annual payout obligations. Reduced payroll tax revenues compound the strain. All of which is to say: building your own retirement cushion, rather than counting on Washington to solve the problem, is not pessimism. It is prudent planning.
So, what does Mr. Wonderful suggest?
First, take personal responsibility and leverage new laws.
O’Leary’s core message is straightforward: stop depending on the government and start building your own retirement through disciplined saving. Under the SECURE 2.0 Act, workers aged 60 to 63 can now take advantage of a “Super Catch-Up” contribution limit of $11,250 for 401(k) plans, pushing the total annual contribution ceiling to $35,750 for those in that age bracket.
Maxing out tax-advantaged accounts should be the first priority. That means 401(k)s, IRAs, and health savings accounts, each of which shelters money from taxes in different ways. One important 2026 rule change: if you earn over $150,000, the IRS now requires that catch-up contributions be made on a Roth (after-tax) basis. If your employer offers a match, contribute at least enough to capture the full match. An employer that matches up to 6% of your salary is effectively offering a 6% raise on that portion of your income. Leaving it on the table is one of the costliest mistakes a retirement saver can make.
Two, cut expenses aggressively and lose the luxuries.
“Radically cut down on all your expenses. Lose the car. Lose the cable. Maybe even lose the cat. You’re in an emergency,” O’Leary has said. “You have to look at every expenditure with a critical eye and make tough decisions about cash flow. Five to seven years before retirement is the time to practice living frugally. Get used to deprivation before you’re deprived.”
Finance personality Suze Orman has made a similar argument around small daily purchases, famously comparing habitual coffee spending to throwing future wealth away. With the average cup of coffee running about $7 today, a daily coffee habit costs roughly $210 a month and $2,520 a year. Redirected into a Roth IRA at $100 a month over 40 years, Orman argues, that money compounds to around $1 million. The math is intentionally dramatic, but the underlying point holds: small, recurring expenses are worth scrutinizing when retirement savings are at stake.
Three, plan seriously for healthcare costs.
O’Leary also emphasizes that retirees routinely underestimate what healthcare will actually cost them. Fidelity’s 2025 Retiree Health Care Cost Estimate puts the expected medical spending for a 65-year-old retiree at $172,500 across retirement, a 4% increase over the prior year’s estimate. That figure covers Medicare premiums, co-payments, and out-of-pocket costs, but it does not include long-term care, which can add substantially to the total.
Add in rising prices for food, utilities, and everyday services, and the math shifts quickly against anyone relying entirely on a government benefit check. Healthcare costs have historically grown at 5% to 6% annually, well above general inflation, which means the gap between Social Security income and actual retirement expenses is likely to widen over time.
Social Security was never designed to carry anyone across the finish line alone. With a looming trust fund shortfall, potential benefit reductions of 22% or more, and healthcare costs on a persistent upward curve, treating the program as a full retirement strategy is a risk most households cannot afford to take. The good news is that the tools exist to close the gap: disciplined saving, smart use of tax-advantaged accounts, and a hard look at spending habits well before retirement arrives.
Editor’s note: This update corrects the OASI trust fund depletion date to late 2032 per the June 2026 SSA Trustees Report, adjusts the projected benefit reduction to 78% of scheduled benefits payable (a roughly 22% cut), updates the Fidelity retirement healthcare cost figure to $172,500 from Fidelity’s 2025 annual estimate, reflects the current 2027 COLA forecast range of 3.8% to 4.7%, adds context on the “One Big Beautiful Bill Act” accelerating trust fund depletion, and updates the average monthly benefit to approximately $2,026.
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