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If Social Security benefits were cut, here's how much more you'd need to save for retirement
Social Security is a main source of income for many Americans over the age of 65, but there are talks of cuts or even complete elimination of the program. If this were to happen, individuals would need to save much more for retirement, tripling or even doubling their savings rate. A certified financial planner provided a scenario of a 30-year-old woman who earns $75,000 a year and already has $20,000 saved for retirement. She would need to save three times more if Social Security benefits were cut or eliminated. Without Social Security, the old-age poverty rate would rise from 10% to nearly 40%. The trust fund for Social Security is estimated to run out in 2033, and Congress will likely need to make changes to the program to fix the solvency problem.
What is the main source of income for Americans age 65 and older?
Social Security is the main source of income for Americans age 65 and older.
How much more would people need to save if Social Security benefits were reduced or eliminated?
People would need to double or triple their savings rate to retire with a sufficient nest egg.
What potential fixes might lawmakers consider to fix the Social Security solvency problem?
Potential fixes might include reducing benefits, delaying the "full retirement age," raising taxes on benefits, increasing the financial penalties for claiming Social Security before full retirement age or a combination of these and other factors.
How could Social Security cuts affect the old-age poverty rate?
The share of older people living in poverty would swell to nearly 40% without the benefits.
How likely is it that current retirees and older people will see a change to their benefits?
It's likely that current retirees and older people will not see a change to their benefits.
👍 This article offers helpful insight into how much more people would need to save in order to prepare for retirement in the event that Social Security benefits were reduced or eliminated.
👎 This article does not provide any clear solutions on how to address Social Security's solvency problem.
Me: It's about the implications of Social Security benefits being cut or eliminated. It looks at how much more people would need to save for retirement and how the old-age poverty rate would skyrocket if this were to happen.
Friend: Wow, that's really scary. It's hard enough for people to save for retirement as it is. If Social Security benefits were cut, that would be a huge blow for people's retirement plans.
Me: Right, and it's not just people who are already retired who would be affected. Younger people would also need to triple their savings rate if Social Security benefits are slashed or eliminated. It's really important for people to plan ahead and be aware of the potential risks.
- Research the current Social Security system and understand how it works.
- Calculate how much you need to save for retirement if Social Security benefits are reduced or eliminated.
- Consider investing in a retirement account such as a 401(k) or IRA to ensure you have enough money for retirement.
- Social Security
- A government program that provides benefits to retired and disabled people and their families.
- Old-age poverty rate
- The percentage of people over the age of 65 who are living in poverty.
- CNBC Advisor Council
- A group of financial advisors who provide advice to CNBC viewers.
- A type of retirement savings plan offered by employers.
- Trust fund
- A fund set up to provide income for a specific purpose, such as retirement.
- The ability of a company or organization to meet its financial obligations.
- Full retirement age
- The age at which a person is eligible to receive full Social Security benefits.
- Payroll taxes
- Taxes paid by employers and employees to fund Social Security and other government programs.
- People who receive benefits from a trust fund or other program.