20 Ways Pre-Retirees Can Prepare For Uncertain Social Security Changes
Aug 1, 2024
As the future of long-term Social Security benefits hangs in the balance, those at or near retirement age are facing the possibility of reduced benefits or changes in eligibility criteria. That’s why it’s important to develop a solid financial strategy before you’re ready to exit the workforce.
Below, 20 Forbes Finance Council members share practical approaches for safeguarding your retirement against Social Security uncertainties. From increasing contributions early to exploring passive income strategies, these tips will help you stay informed and mitigate your risk of financial instability during your golden years.
- Increase Retirement Plan Contributions Early
Social Security changes could impact anyone not already on Social Security benefits; however, it is the youngest part of the workforce that is at greatest risk. For those workers in their 20s, 30s and 40s, start increasing retirement plan contributions and reduce assumptions made on Social Security income. For financial planning purposes and to be safe, cut the estimated benefits in half. – Loreen Gilbert, WealthWise Financial Services
- Assume Benefits Will Start Later
In my opinion, anyone over the age of 60 won’t be surprised by significant changes to Social Security (SSI). However, if you’re 50 or younger, it’s prudent to assume that benefits will be delayed until age 70 or 75. It’s important to remember that when SSI was enacted decades ago, the average life expectancy for a U.S. citizen was 65. Having benefits match life expectancy is basic fiscal prudence. – Ivan Illan, Aligne Wealth Advisors Investment Management (AWAIM®)
- Create A Comprehensive Estate Plan
Pre-retirees should diversify their retirement portfolios (IRAs, 401(k)s) and consider annuities plus other passive income sources. Creating a comprehensive estate plan with trusts and long-term care provisions ensures financial security and can help reduce financial burdens on loved ones in the future. – Cody Barbo, Trust & Will
- Build Passive Income Strategies
To prepare for potential Social Security changes, younger people should focus on diversifying income streams, maximizing retirement account contributions and building passive income. Those approaching retirement should focus on building retirement income strategies, delaying claiming their social security benefits and optimizing their portfolios. – Greg Welborn, First Financial Consulting
- Don’t Wait To Start Saving
Start saving today. Do not wait. There are many tools and ways to start small—even a dollar a day or $5 per week will add up. Once you flex the muscle and learn to set aside a small amount, gradually increase the amount. – Kathleen Craig, Plinqit
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- Plan For Half Of Your Potential Social Security Amount
Plan your retirement with half of your potential social security amount and start saving now, along with looking at what you spend today so you can plan for your future. If you receive more social security than you planned for, it will be a bonus and not a deficit! – Zachary W. Herzog, Wolfgang Capital LLC
- Contribute Based On Availability, Capacity And Risk
Diversify your retirement savings. Pre-retirees should start contributing to 401(k)s, IRAs and HSAs based on their income availability, capacity to save and risk appetite. – Raghavkumar Parmar, MMA Pan Asia Fund Management
- Pay Off Debt And Speak To A Financial Expert
Pre-retirees should concentrate on diversifying their income sources in order to get ready for any changes to Social Security. Financial stability can be attained by making periodic passive income investments in real estate or small businesses. They can reduce risks and improve their financial situation by paying off debt, investing more for retirement and speaking with a financial expert. – Gomathy Periathiruvadi, Alita Systems
- Invest In Skill Development
Pre-retirees should invest in lifelong learning and skill development to prepare for potential changes in Social Security benefits. By continuously updating their skills, they can enhance employability and income potential, enabling them to work longer if needed or take part-time roles to supplement retirement income. – Ash Shetty, CFA, PineBridge Investments
- Use Fixed Index Annuities
This simply magnifies the importance of having multiple guaranteed sources of income in retirement! If you’re not one of the 13.5% of workers who will receive a pension, it’s up to you to solve your income gap once you retire. This is where I love the use of Fixed Index Annuities, which can guarantee lifetime income, while still providing liquidity and named beneficiaries—all for low or zero fees. – Mike Zaino, The Zaino Group
- Don’t Incorporate Social Security Into Your Plan
We never incorporate SS benefits into a retirement plan, unless you are within the year of filing for them. Given longevity risk and inflationary pressures on living expenses, much of the burden will be on self-funding your retirement. It is an old adage, but it is essential to diversify. That includes the various buckets or types of accounts you have saved within. – Gregory Clifford, The Clifford Group
- Understand The Longevity Of Social Security
Social Security is intersecting the longevity economy straining social security systems, driving the need for policy adjustments and the development of complementary financial products to ensure the financial security of an aging population. Changes may include raising the retirement age and modifying benefit formulas ensuring system sustainability in the face of a growing and aging population. – Richard Winston, Slalom
- Delay Retirement And Stay Informed
Pre-retirees can prepare for potential changes in Social Security by diversifying their retirement savings. Increase contributions to 401(k)s, IRAs, and other retirement accounts. Consider delaying retirement to maximize benefits, reduce debt and build an emergency fund. Stay informed about policy changes and adjust financial plans accordingly to ensure a secure retirement. – Gianluca Sidoti, The Wealth Company International FZCO
- Familiarize Yourself With Baseline Benefit Records
Review your baseline benefit records and earnings history to familiarize yourself with what is in place and ensure the records are reflected correctly. To do so, make sure to establish an online account for yourself at SSA.gov. Once you have access, familiarize yourself with your earnings history and look for any reporting that is inaccurate. Make a habit of checking the site annually to review. – Brian Niksa, Capstone Financial Advisors, Inc.
- Purchase An Annuity And Invest In Real Estate
For many, social security may be the sole lifelong retirement income source. Purchasing an annuity with guaranteed lifetime income can offset the risk of potential SSI reductions. Investing in income-producing real estate is another great option to increase cash flow while increasing your asset base. – Ryan Loynd, BrightGuide Financial
- Diversify Retirement Income Streams
Pre-retirees can diversify and plan ahead so that they can have multiple streams of income during retirement. Becoming debt free also helps. Saving more now isn’t a bad idea, now or ever! – Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management
- Customize Plan With Multiple Scenarios
Create a customizable retirement plan with multiple scenarios depending on benefit amounts and financial strategies. These include contingency planning, tax-advantaged account optimization and skill and education investments to promote flexibility. For retirement healthcare savings, prioritize health and fitness. Conduct financial assessments and consult advisors to tailor retirement plans. – Neil Anders, Trusted Rate, Inc.
- Build A Strong Emergency Fund
Pre-retirees should consider building a robust emergency fund to cover unexpected expenses and reduce reliance on Social Security. By having six to 12 months of living expenses saved, they can better manage financial uncertainties and adapt to potential changes in benefits without immediate financial stress. – Thomas Hartmann, Funded Unicorn GmbH
- Prepare And Invest Wisely
The Congressional Budget Office and Social Security Trustee’s report indicates that Social Security won’t meet its obligations by 2033. With rising national debt and increasing life expectancy, we must prepare by saving more, investing wisely, creating dual income sources and leveraging compounding growth. We should rely on disciplined saving and investing rather than unstable government programs. – Paul Daneshrad, StarPoint Properties
- Be Financially Literate And Invest In A Mix Of Stocks And Bonds
Diversifying retirement savings beyond 401(k)s and IRAs is crucial. Invest in a mix of stocks, bonds and real estate to spread out risk and potentially increase returns. Prioritize financial literacy to make informed decisions. Seek guidance from a financial advisor to create a tailored retirement strategy. Manage expenses and maximize current resources for a more secure future. – Pankaj Vasani, Cube Highways InvIT
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Disclosures:
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Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. WealthWise Financial Services and LPL Financial are not affiliated with any other referenced entities. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.