Social Security’s long-term financial sustainability is a topic of concern for many Americans. To understand how potential funding cuts could impact individuals, GOBankingRates conducted an analysis of projected Social Security benefits over the next decade.
Currently, the average monthly benefit amount is $1,796.31 as of October 2023. By applying the average annual cost-of-living adjustments (COLA) increase of 2.6% from the past decade, GOBankingRates projected the average benefits for the next 10 years. The forecasted average benefit would gradually increase to $2,321.94 per month.
However, experts warn that the Social Security Trust Fund could be depleted within the next 10 years. In such a scenario, benefits may be reduced to approximately 77% of the projected amount, aligning with the available revenue. Consequently, the average monthly Social Security benefits would drop from $2,321.94 to $1,787.89.
This potential cut in benefits could have a significant impact on retiring Baby Boomers, who heavily rely on Social Security as a source of income. According to H&R Block’s 2022 Outlook on American Life report, 44% of Baby Boomers are already retired, while 38% are still working full-time. Additionally, 65% express dissatisfaction with their income growth, with 42% claiming to be financially worse off than the previous year.
To prepare for the possibility of reduced benefits, financial planners recommend diversifying income sources and exploring alternative streams such as investments, part-time work, or rental income. Planning for inflation and allowing retirement savings to grow are also crucial strategies to mitigate the impact of potential Social Security cuts.
While the future of Social Security remains uncertain, proactive preparation and seeking professional advice can help individuals make informed decisions for their retirement.