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How much of a cut to social security benefits can you expect based on your age?

In 2034, the incoming income will be enough to pay about 76% of planned Social Security benefits, a report by 2020 Social Security administrators predicts.

How could different generations plan this? Should they plan for a 24% drop in their planned benefit? Shouldn’t they factor Social Security benefits into their retirement income at all? Or maybe they’re doing something else.

“While I think it is much more likely that a combination of reforms will remove the need for spending cuts of the magnitude the trustees report suggests, people need to be aware of the impact any cut would have on their overall financial situation,” Joe said. Elsasser, a certified financial planner and president of Covisum.

Reach out to your congressional representatives and make sure they hear your concern that Social Security needs a resolution. Use any tax-advantaged vehicle available to you. Learn to be a better investor so that the savings you have will pay off more in the long run.

What are some of those reforms? Tax increases, benefits or a combination of both are the often mentioned reforms. But to date, there seems to be little to no interest on the part of lawmakers in addressing the coming shortfall between incoming revenues and planned benefits.

What to do then? “The impact on Social Security solvency tends to depend on generations,” explains Marcia Mantell, director of Mantell Retirement Consulting.

She agrees with Elsasser that Social Security beneficiaries and potential beneficiaries should consider the following measures:

Baby boomers: on track

Social Security benefits estimates for those born from 1946 to 1964 should be on track and unlikely to be lowered if Congress fails to find a solution to support, or fails to, the reserve account within the overall trust fund. succeeds to raise payroll taxes to make the commitments to these retirees, says Mantell.

Elsasser agrees, but suggests taking some precautions. “Baby boomers need to plan for benefits as projected, but stress-test for a cut in benefits,” he says. “Historically, benefits have been phased in over time.”

For example, the last solvency crisis of this magnitude occurred in 1983. “And some of the reforms that were implemented are still being phased in today, such as raising the full retirement age from 65 to 67,” notes Elsasser.

Story continues

According to Elsasser, stress testing allows you to practice what you would change in your plan if the full reduction became a reality. “If the cuts on your plan are too painful to bear when they come up, make smaller changes now and keep an eye on the situation,” he says. “Smaller cuts to your lifestyle will hurt less sooner than bigger ones later.”

Covisum has a benefit discount calculator that allows consumers to determine how benefit discounts would affect their break-even age.

► Peculiarities of Social Security: Your birthday determines the day you get your check

Social Security: Why you should start collecting benefits before 70

Gen X: plan a 10% discount

If you were born between 1965 and 1980, planning your retirement income becomes more important than ever, Mantell warns.

Elsasser recommends planning a 10% cut in your Social Security benefits and doing a retirement projection that includes a reduced Social Security amount to balance your lifestyle today with the lifestyle you would like to live after retirement.

The good news about this bad news? “For the 65 million of you who are between 41 and 56 years old, you’re in your prime,” Mantell says. And that means you can and should increase your personal savings.

“You’ll do well to rethink, re-budget, and redesign your spending and your savings strategy in case Social Security brings in less revenue than currently projected,” she warns. “You have time on your side, and every $1,000 or $2,000 or $5,000 you can throw away right now will increase your income for retirement and make the tradeoffs you may need to make.”

And what’s the worst-case scenario if you ramp up your savings and cut Social Security benefits? “You end up getting more than you need,” says Elsasser.

Gen Z and Millennials: Too Early to Say — or Worry

Experts say it’s too early for Millennials and Generation Zers to worry about lowering Social Security.

“You’re too young to confidently guess how Social Security will pay the benefits,” notes Mantell. “Half of you don’t even have your 40 credits to qualify. So your focus will be on you.”

Elsasser shares that view: “While it’s important for everyone, especially if you’re under 40, you should continue to focus on improving your skills, education and training to maximize your earning potential during your peak income years,” he advises. “Consistently saving in vehicles you won’t touch until retirement is also important. In any case, be sure to take advantage of corporate competitions or incentives.

The best scenario

According to Michael Finke, a professor at the American College of Financial Services, all this planning for a potential benefit cut could be a lot of commotion.

“I don’t know of a single Social Security expert who believes Congress will allow significant cuts to beneficiaries,” he says. “Politicians face a not-for-profit situation where it is painful to make changes today to strengthen Social Security because it will mean either higher taxes or lower benefits, but the alternative of not changing anything is worse: a large number of voters see a reduction in their retirement income.”

And this, he predicts, will motivate Congress to raise payroll taxes, raise the claim age or change the inflation adjustment.

This article originally appeared on USA TODAY: Social Security Cuts: What to Expect Based on Your Age?

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