Policy choices by the next U.S. president could determine how quickly Social Security’s retirement trust fund becomes insolvent and benefits must be cut to keep the program afloat.
Former President Donald Trump is proposing changes that could speed up the day of reckoning by several years.
So, how can you prepare for the worst? We’ve got some tips, but first, let’s dig in a bit deeper to the potential problems.
An uncertain future
Social Security currently funds about a third of retirement income for older Americans, supporting millions of retirees, disabled workers, and dependents. However, the program has been paying out more than it collects in taxes, eroding its excess funds.
Former President Trump’s proposals could worsen this outlook. His plan to eliminate income taxes on Social Security benefits, overtime pay, and tipped income could create a significant funding shortfall.
According to the Committee for a Responsible Federal Budget (CRFB), Trump’s plan would reduce payroll and benefits income taxes by $950 billion, with additional losses from his tariff and immigration policies.
If implemented, these changes could cause Social Security’s retirement trust fund to be depleted by 2031, three years earlier than currently projected, potentially slashing monthly retirement benefits by a third.
What to do
We have compiled four actions you can take now to help you prepare for uncertain days ahead. If funding improves or no big cuts materialize, at least you’ll be in a better place financially.
Meanwhile, if cuts do emerge, you’ll have more protection from them.
1. Maintain a savings discipline
The clock is ticking. The government has said rates will start declining this year, and the interest on savings accounts and CDs is already starting to come down.
Now’s the time to lock in a high rate on your savings before it’s too late.
With a Gainbridge® SteadyPace™ annuity, you can lock in a guaranteed 5.65% APY — that’s four times higher than the national average CD rate!*
Not only does Gainbridge® SteadyPace™ provide higher returns, it allows for your savings to grow tax-deferred, making your money work harder for you.
Gainbridge® also offers the flexibility of free withdrawals of up to 10% in aggregate, beginning in the first contract year, with no hidden fees.**
Get started today and beat the banks at their own game! Click here for information about SteadyPace™ and lock in your 5.65% APY today.***
*Source: Bankrate.com, national average of 3-year CD, week of 12/28/23.
Rates subject to change.
**Withdrawals prior to age 59 ½ will be subject to a 10% federal tax penalty and if taken before maturity and above the 10% free withdrawal amount or MD may be subject to a withdrawal charge and a market value adjustment.
***Rates are subject to change at any time, and the rate mentioned may no longer be current. Please visit Gainbridge.io for current rates, full product disclosures and disclaimer. All guarantees are based on the claims-paying ability and financial strength of the issuing insurance company. SteadyPaceTM, a multi-year guaranteed annuity, is issued by Gainbridge Life Insurance Company in Zionsville, Indiana on form number ICC22-D-MYGA-BASE.
2. Consider working for an extra two years
Imagine working for another couple of years. That could give you more income to pay down debt while allowing you to hold off on tapping into savings that now have two more years to compound and grow. Working more might also see your average Social Security benefit increase in the months to years beyond your retirement date.
To properly manage your money, work with a professional — it’s totally worth it. If you’re not doing this, you could be missing out on some serious financial gains.
A Vanguard study found that, on average, a hypothetical $500,000 investment over 25 years would grow to $1.7 million if you manage it yourself, but more than $3.4 million if you work with a financial advisor. That’s twice as much!
If you’ve got at least $100,000 in investments, check out a free service called SmartAsset. You fill out a short questionnaire and instantly get matched with up to three vetted financial advisors in your area, all legally bound to work in your best interests.
3. Consider generating passive income
Boosting your income can come in different forms. Your salary is your active income, but you can also consider investments that offer passive income, such as investing in rental property. Rather than buying and managing property by yourself, there are now plenty of “crowd-funded” sources of real estate that you can get into for as little as $500.
One to consider is Fundrise. Check it out and see if it makes sense for you.
Note: This is a testimonial in partnership with Fundrise. We earn a commission from partner links on moneytalksnews.com. All opinions are our own.
4. Get help to destroy your debts
Worrying about debt is probably the worst way you can spend your time, and paying interest and late fees is the worst way you can spend your money.
If you’ve got a problem with debt, the sooner you deal with it, the better.
If you have over $10,000 of credit card debt, talk to a company that can help. National Debt Relief is one of the most respected providers of debt relief in the U.S. They may be able to help you pay a reduced amount and get out of debt faster.
Remember: Every dollar of interest you’re paying is making a lender richer and making you poorer. If you could use some help or advice, it's only a click away.
Add a Comment