Let’s address something that’s been on a lot of minds lately—Social Security. You’ve probably heard the rumors: the program might run out of money by 2033 if nothing changes. If that happens, your benefits could drop from 100% to 79%.

Obviously, that’s not what anyone wants. The good news? This isn’t the first time Social Security has faced trouble. Back in 1985, similar concerns arose, but changes were made just in time. We’ve been through this before, and there are ways the program could be adjusted again to stay afloat.

Let’s take a look at five potential changes that could be on the table.

1. Raising the Retirement Age

• In the past, Social Security’s retirement age increased from 65 to 67 in phases.
• Moving forward, it’s possible the retirement age could rise again—maybe to 68, 69, or even 70.

2. Increasing Taxes

There are a couple of ways the government could do this:

• Raise the Contribution Rate: The percentage everyone pays into Social Security could increase. This would impact all workers.
• Raise the Wage Cap: Right now, once you earn over $160,000, you stop paying Social Security taxes on any additional income. They might increase that cap to $180,000 or more—which would only affect higher earners.

3. Adjusting the Benefit Formula

• The formula used to calculate Social Security benefits could change, but it’s likely this would only affect younger workers, those under 50 or 55.
• If you’re closer to retirement, your benefit calculation is probably safe.

4. Reducing the Cost of Living Adjustment (COLA)

• COLA helps Social Security keep up with inflation by tying adjustments to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
• They could switch to a lower index, which means Social Security may not keep up with inflation in the future.

5. Implementing Means Testing

• Means testing is already used with Medicare, through the IRMAA surcharge for high-income earners.
• This concept could be applied to Social Security, with changes likely affecting younger workers rather than those close to retirement.

What Can You Do Now?

Even though Social Security isn’t set to change right away, it’s crucial to have a plan. You don’t want your retirement to rely on a government program that might look very different by the time you need it.

This is a good time to stress-test your financial plan. Make sure you’re on track to maintain the lifestyle you want, regardless of what happens with Social Security. Having a solid plan in place gives you control over your future, so you aren’t left depending on something you can’t predict.

If you have any questions or want to explore ways to build a more secure financial plan, reach out. We’re here to help you prepare for whatever changes may come.