Millions of older Americans today count on Social Security to provide a large chunk of their monthly retirement income. And if Social Security were to cut benefits, many seniors would no doubt find themselves grappling with a major financial crisis.
Unfortunately, benefit cuts are now a distinct possibility, given Social Security’s impending financial shortfall. And even scarier is that they may not be so far away. So it pays for working and retired Americans alike to gear up for that possibility — and have a backup plan.
Why things are looking bleak for Social Security
Social Security gets the bulk of its funding from payroll taxes. And while that revenue stream is set to continue, in the coming years, it will shrivel as baby boomers exit the labor force in droves.
Of course, the natural follow-up question is, “Won’t younger workers come in and make up those payroll taxes?” But the problem is that the rate of replacement workers is set to fall short, leaving Social Security with a glaring deficit it will rely on its trust funds to cover.
