Retiring in 2034 When Social Security Is Projected to Run Out? 9 Things To Do Now

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This year’s Social Security Trustees Report delivered some dire news to retirees. It projects that if the Federal government does nothing else, the Social Security Reserve funds will be depleted, or severely reduced, by 2034, which is only a decade away.

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This is bad news for anyone retiring soon, especially in the next decade. While there are still many things that can happen between now and then to bolster and secure those funds, it’s quite clear that retirees and soon-to-be retirees alike should be taking control of their financial situation now.

These experts explain what people who are retiring in a decade should do now to prepare.

Don’t Panic

The impact of the shortfall in the Social Security reserve will unfortunately not fall solely on those who are retiring in the 2034, according to Stephen Kates, CFP and principal financial analyst for Annuity.org.

“If the issue is not corrected, then anyone earning Social Security benefits should expect a reduction in their benefits by about twenty percent.”

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However, Kates recommended that you not panic. “The shortfall, while extremely destabilizing for the program, doesn’t spell its doom. Expectations are that there will still be enough taxes earned to support partial payments to all recipients (80%).”

With a decade left to go, the projections on when it happens and the exact reduction are subject to change, he said.

Assume a 20% Reduction

He urged people planning to retire in the next decade to put away more of their pre-retirement income using personal savings.

“It is easy to look at what your projected Social Security benefits will be in the future. To take a conservative strategy toward your retirement income planning, haircut these benefits by 20% and use that as the basis for your Social Security payments in a retirement plan.”

Work With an Advisor

Kates highly recommended that soon-to-be retirees take financial planning with an advisor seriously. “Working with a professional who can offer you guidance on how to turn your savings into an income plan will be important if you are shouldering more of the income burden yourself. With less Social Security income, your retirement plan may need adjusting and burying your head in the sand will not help.”

Plan for Flexibility, Growth and Guarantees

Kates said that it’s crucial to build up a savings of at least six to 12 months worth of cash or “cash equivalents” so that “you won’t need to raid your investments in a financial squeeze or an economic downturn.”

A strong emergency fund is one of the best ways to protect yourself and your plan from unknowns.

Additionally, your savings should be invested into tax-efficient, growth-oriented securities, he said. “Stock investments over the long term have beat inflation and offered investors a powerful means to increase their wealth over time.”

Your goal should be to create as many guaranteed streams of income as you can to cover all essential expenses, Kates said.

Delay Taking Social Security

If the likely event occurs, that you receive a reduced amount of Social Security versus none at all, Marty Burbank, an estate planning attorney and owner of OC Elder Law, recommended delaying taking those benefits until at least age 70, which will maximize what you do get.

Brokerage Accounts

Like Kates, Burbank encouraged aggressive investment in the stock market through brokerage accounts and retirement plans like 401(k)s.

“Historically, the stock market has achieved the highest returns over time,” Burbank said. “Allocate most of your portfolio to stocks, especially in technology, healthcare and emerging markets. These sectors often provide the best long-term growth.”

Consider Annuities

Burbank also recommended investing in fixed annuities, which provide guaranteed payments for life. Variable annuities allow you to invest in the stock market, but you can do that directly through a brokerage account.

“Look for low-fee annuities that meet your income needs,” Burbank said. “Annuities can help diversify your sources of retirement cash flow beyond Social Security and stocks.”

Assess Your Finances Every Quarter

Additionally, you should keep on top of your retirement planning not just annually but quarterly, according to Adam Nash, adjunct personal finance professor at Stanford, and current CEO and co-founder of Daffy.

“Look at your finances quarter by quarter. Ultra-wealthy individuals regularly monitor their investments to stay informed about their financial gains and losses,” Nash said. “This habit helps them make informed decisions and adjust their investment strategies accordingly.”

By tracking investments quarterly, anyone can gain a better understanding of their financial portfolio and make smarter investment choices.

Estimate Your Taxable Gains 

While it’s great to be making earnings on your investments, dividends and gains also mean capital gains taxes.

“If your investments are reaping dividends or gains, understand your tax obligations so you can optimize your tax strategies and minimize tax liabilities, Nash said.

“Sell your investment losses to offset your gains at the end of the year. Ultra-wealthy individuals do this to offset realized gains and reduce capital gains taxes.”

“Implement a ‘tax-loss harvesting’ strategy to offset realized gains. [This can] help you sell selected stocks at a loss in order to lower the amount of capital gains tax you owe.”

By taking action now to save, invest and plan thoroughly, you can ensure a comfortable retirement even if Social Security is limited or reduced.

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This article originally appeared on GOBankingRates.com: Retiring in 2034 When Social Security Is Projected to Run Out? 9 Things To Do Now