Why 2032 Could Quietly Become the Year Everything Changes for Social Security

If you work and pay into Social Security throughout your career, you may not be happy to see those taxes come out of your wages each pay period. But what may soften the blow is the promise of steady monthly benefits during retirement.

There’s no reason to assume Social Security won’t pay you a monthly benefit once you’re ready to retire, even if that milestone is decades away. But you may not end up getting your monthly benefits in full.

That’s because Social Security is facing a serious financial crisis that lawmakers only have a limited amount of time to address. And while they might manage to come to a solution before drastic cuts happen, that’s not guaranteed.

Social Security’s financial problem is getting harder to ignore

Social Security’s main financial problem is simple. The program is expected to bring in less money in revenue than what it needs to pay retirees in benefits.

A few factors are driving this trend. Americans are living longer, which means retirees are collecting benefits for a greater number of years. At the same time, birth rates have declined, resulting in fewer people entering the workforce and supporting the system through payroll taxes.

The large baby boomer generation is also moving deeper into retirement, placing additional strain on the program.

For now, Social Security can rely on trust funds built up from excess revenue. But as benefit obligations grow, those reserves are being whittled down.

The Congressional Budget Office projects that Social Security’s Old-Age and Survivors Insurance Trust Fund will be out of money by 2032. That’s the trust fund that pays retirement benefits.

Once that happens, Social Security will still have payroll tax revenue supporting it. But that revenue alone is not expected to keep up with scheduled benefits, which means that in less than a decade, Social Security could be looking at widespread cuts.

Retirees and workers may need to prepare for uncertainty

For current retirees, the prospect of changes to Social Security can feel alarming, especially because many households rely heavily on benefits to cover basic expenses. Historically, however, lawmakers have always managed to prevent Social Security cuts. There’s a good chance they’ll be able to take action and prevent major cuts in the near term.

Will they be able to prevent cuts entirely? That’s a little less certain.

Unfortunately, the most current retirees can generally do to gear up for Social Security cuts is reduce spending and see about re-joining the workforce in some capacity, even if it means occasional gig workers. Full-time workers have more options, though.

If you’re in that category, the best thing you can do is save well for retirement so you’re less reliant on Social Security to cover your future expenses. That way, if the program does undergo broad cuts, you’ll hopefully be prepared with a robust nest egg you can use to supplement those monthly checks and make up for smaller ones.

Of course, that 2032 trust fund depletion date could wiggle, so you shouldn’t assume that it’s set in stone. What you should do, though, is prepare for the possibility of Social Security cuts, even if they don’t end up happening.