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Current Social Security recipients and those planning to receive Social Security payments in the near future may need to start building an alternative plan. That was one of the big takeaways this week when a new report showed that the program is slated to become insolvent by 2032. That will result in a 22% cut in monthly checks for recipients. This reduction could be financially devastating for millions of retirees, but especially so now as they contend with surging inflation and higher interest rates that are making even everyday expenses difficult to cover without having to borrow money.
But recipients aren’t totally out of options, either, especially considering that they have multiple years to prepare for this possibility. While a 22% reduction may not be easy to make up, there are some steps recipients can take now that will boost their savings immediately and reduce their expenses at the same time. Below, we’ll outline some of the ways they can accomplish both goals.
Start by earning more interest on your money with a high-rate CD account here.
What Social Security recipients should (and shouldn’t do) before potential insolvency
To circumvent a potential reduction in their monthly Social Security checks, current recipients and those planning to receive Social Security in the years ahead should strongly consider making these four moves right now, before any reductions take effect:
Look for ways to grow the money you’re currently receiving
The days of leaving your money in a traditional savings account, which has an average rate of just 0.38%, should have likely already ended. But judging by what could happen to Social Security, the urgency of shifting your money out of this account type is even more pronounced now.
And with rates on certificates of deposit (CDs), high-yield savings and money market accounts all around 4% or higher now, this should be a relatively easy (and profitable) adjustment to make. You can even compare rates, terms, and banks online right now, making it easier than ever to transfer your money from a low-rate account into a high-rate alternative.
Get started with a high-yield savings account online today.
Consider solutions for your current debt
With credit card interest rates over 20% right now and the debt you have there compounding daily, you must address this issue now before it grows further. Not only will erasing your debt give you peace of mind and financial stability, but it will also add more money to your budget to offset potential Social Security cuts.
And there are multiple debt relief options available to explore now, from debt consolidation loans to debt management programs to even credit card debt forgiveness and bankruptcy for extreme cases. In other words, if you can’t bring more money in each month, then it’s critical that you stop sending so much out. Debt relief companies can help you manage that equation more effectively.
Check your credit card debt forgiveness qualifications here.
Reconsider your insurance protections and premiums
Do you have enough insurance to cover gaps in your Medicare coverage and long-term care needs? On the other end of the spectrum, are you overpaying for coverage you can’t use and don’t need? It may be time, then, to reconsider your insurance protections and premiums, both for ways to shore up the financial protection you actually require and to reduce or even eliminate the costs you don’t.
This will take some time and effort, and it will require consulting with multiple insurance companies across types. However, if the result is increased protection and greater savings, it will be worth it.
Review your long-term care insurance options now to learn more.
Review your expected RMDs – now
Your retirement funds won’t just sit in an account untouched until you decide to use them. Once you hit age 73, you’ll actually be required to access them and, depending on how much you have saved and your age, the required minimum distribution (RMD) may be significant.
This can help ease the potential loss of Social Security benefits, though there will be tax implications to contend with as you likely saved these funds in a tax-deferred account. Start reviewing your expected RMDs now, so you know exactly how much you’ll be expected to withdraw, when you’ll be expected to withdraw it and how much of an associated tax bill you’ll have to pay as a result.
The bottom line
Social Security insolvency isn’t guaranteed and, even if current projections hold, it’s still around six years away. But that doesn’t mean recipients and future recipients should sit idly, either. By exploring the ways to grow their current funds, reviewing their debt relief options, reconsidering their insurance protections and premiums and understanding their expected RMDs, retirees can start preparing now – and boost their chances of financial success in the interim, before any potential impacts are even felt.