If Congress doesn’t act soon, millions of Americans could see their Social Security benefits reduced within the next decade. According to the 2025 Trustees Report, the Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100% of total scheduled benefits until 2033, after which point benefits would be cut by 23%.
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If benefits are reduced, it will be up to the individual to make up the difference. A 23% cut would require $138,000 in additional savings to generate the same income, based on the widely accepted 4% retirement withdrawal rule, a new PensionBee analysis found. That’s a steep ask, especially for those nearing retirement. But the earlier you start preparing, the more manageable it becomes.
Here’s how the additional $138,000 in required savings breaks down for workers who will be retiring after 2033.
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How Much More US Workers Must Save by Age To Offset Social Security Cuts
The PensionBee analysis broke down how much extra workers of all ages would need to set aside each month to save an additional $138,000 by the time they retire, assuming a retirement age of 67 and 5% investment returns:
Age 25: $67/month
Age 35: $121/month
Age 45: $238/month
Age 55: $701/month
“Those nearing retirement are in a worse position to offset cuts, but there are tangible ways to buffer the potential impact,” said Romi Savova, founder and CEO of PensionBee.
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Expert Tips To Offset the Impact of Social Security Cuts
Savova recommended that Americans who are approaching retirement take advantage of catch-up contributions, which allow people ages 50 and over to contribute an extra $7,500 to their 401(k). Starting this year, Secure 2.0 also allows those ages 60 to 63 to make “super catch-up” contributions of an additional $11,250.
“Some Americans may choose to delay retirement, which gives more time to save, pay down debt and allow investments to grow,” Savova said. “You can also consider drawing from personal retirement savings first while delaying Social Security benefits, which increases your monthly payout by about 8% for each year you wait past full retirement age until the age of 70.”
Smart Retirement Planning Moves for Americans of All Ages
Whether you’re 25 or 55, now is the time to take an active role in your retirement planning.
“If you’re not already saving for your retirement, consider this your wake-up call,” Savova said. “The longer your money is in the market, the less you’ll need to contribute to make up for lost benefits, so it really makes sense to save as much — as early — as you can.”
It’s also important to monitor your retirement accounts regularly to ensure you are staying on track. You may need to make adjustments, such as contributing enough to get your full employer match or even contributing the maximum annual limit if possible.
In addition, make sure you rollover your 401(k) account if you switch jobs.
“The system is complicated, and the average person will have 12 jobs in their lifetime, which can mean an equal number of scattered retirement accounts,” Savova said. “It’s your responsibility to ensure every account is tracked and invested wisely. Consolidating accounts into a central home, like an IRA, can make it easier to manage your savings and give you a clearer picture of your progress.”
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This article originally appeared on GOBankingRates.com: Social Security Cuts Could Cost You $138K: Here’s How Much More You’ll Need To Save
