Social Security Cuts Are on the Table: 3 Things To Ask Yourself Before Retiring in 2024
Written by
Vance Cariaga
Edited by
Cory Dudak
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Once you decide to retire, your next decision will be when to collect Social Security benefits. The longer you wait, the higher your monthly payment. Normally, this means you should hold off as long as possible, but things are complicated right now due to a looming Social Security funding shortfall that could lead to a cut in benefits.
The projected shortfall is tied to Social Security’s Old Age and Survivors Insurance (OASI) Trust Fund, which is expected to run out of money in about a decade. When it does, the program will be funded solely by payroll taxes, which currently cover only 77% of benefits. Some retirees could face a cut of more than $17,000 a year when the trust fund is depleted, according to one estimate.
Lawmakers, politicians and policymakers have proposed various reforms to fix Social Security before it runs out of money. Most focus on one of three areas: increasing Social Security payroll taxes, raising the full retirement age, or slashing benefits for the wealthy and others.
So far, none of these proposals have advanced past the idea stage, and it’s uncertain when or if they will ever make it into law. But there’s always the possibility they will lead to policy changes — which means you have some thinking to do if you plan to retire in 2024.
Here’s a look at three things you should ask yourself.
Should I Collect Social Security Now?
This is the big question, no matter when you retire. You can claim benefits as early as age 62, but that’s also the age when your monthly Social Security payment will be at its lowest. If you file at age 62, you will lose 30% of the full Social Security benefits you would have received at the full retirement age of 67. If you file at 64, you will only lose 20% of the full benefits. You maximum benefit comes when you file at age 70.
What Is My Debt/Expense Load?
Although you are usually better off waiting as long as possible to claim Social Security, there are exceptions. If you have a lot of debt to pay off, you might be better off claiming early so you can use the money to pay down debt and put yourself in a stronger financial position. Similarly, if you have heavy expenses tied to healthcare, you might also want to collect early.
How Much Savings Do I Have for Retirement?
If you plan to retire in 2024, chances are you are in your 60s. For most Americans, this means you should have anywhere from 5 times to 11 times your annual salary saved up for retirement, according to T. Rowe Price. Suppose your salary is in line with U.S. median earnings, which were $1,145 a week or $59,540 a year during the 2023 fourth quarter, according to the U.S. Bureau of Labor Statistics. That means you should have somewhere between about $300,000 and $650,000 in retirement savings. If you have much less than that, you might want to delay claiming Social Security to ensure a bigger monthly payment.
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