Current Social Security beneficiaries and those planning to receive payments in the near future may need to start putting together an alternative plan. That was one of the key takeaways this week when a new report showed that the program is predicted to become insolvent by 2032. This will result in a 22% cut to beneficiaries’ monthly checks. This reduction could be financially devastating for millions of retirees, especially now as they face rising inflation and higher interest rates that are making it difficult to even pay everyday expenses without taking out loans.
But beneficiaries are not entirely without options either, especially considering they have several years to prepare for this possibility. While a 22% reduction may not be easy to make up, there are some steps beneficiaries can take now to increase their savings immediately and reduce their expenses at the same time. Below, we’ll outline some ways they can achieve both goals.
Look for ways to increase the money you are currently receiving.
The times when you could leave your money in a traditional savings account, with an average rate of just 0.38%, should probably be over by now. But judging by what could happen to Social Security, the urgency of moving money out of this type of account is even more evident now.
And with rates on certificates of deposit (CDs), high-yield savings accounts, and money market accounts hovering around 4% or more these days, this should be a relatively easy (and profitable) move. You can even compare rates, terms and banks online right now, making it easier than ever to transfer your money from a low interest rate account to a high rate alternative.
Consider solutions to your current debts.
With credit card interest rates above 20% these days and debt increasing daily, you need to address this problem now before it gets worse. Paying off your debts will not only bring you peace of mind and financial stability, it will also increase your disposable income to offset possible cuts to Social Security.
There are several debt relief options available for you to explore now, from debt consolidation loans and debt management programs to credit card debt forgiveness and bankruptcy for extreme cases. In other words, if you cannot increase your monthly income, it is essential that you stop spending so much. Debt relief companies can help you manage this situation more effectively.
Reevaluate your insurance protections and premiums.
Do you have enough insurance to cover gaps in your Medicare coverage and your long-term care needs? On the other hand, are you paying too much for coverage you don’t use and don’t need? It may be time to reconsider your insurance protections and premiums, both to bolster the financial protection you really need and to reduce or even eliminate unnecessary costs.
This will require time and effort, as well as consultations with several insurers from different sectors. However, if the result is greater protection and savings, it will be worth it.
Review your anticipated mandatory minimum withdrawals (RMDs) now.
Your retirement funds won’t sit in an account until you decide to use them. Once you turn 73, you’ll be required to access them, and depending on the amount you’ve saved and your age, the required minimum withdrawal (RMD) could be significant.
This can help minimize the potential loss of Social Security benefits, although there are tax implications to consider since you likely saved these funds in a tax-deferred account. Start reviewing your required minimum withdrawals (RMDs) now so you know exactly how much you should take out, when you should take it out, and how much tax you will have to pay.
