With Social Security Cuts Looming, Here’s How to Supplement Those Benefits With Guaranteed Income

• Unless lawmakers come up with a solution, Social Security could cut retirement benefits by 21% starting in 2033.

• Annuities can be a great way to supplement your Social Security checks—whether or not they decrease.

• Annuities offer unbeatable lifetime income guarantees, but there are some pitfalls to be aware of.

• A recent study found that there’s one habit that can double Americans’ retirement savings and take retirement from a dream to a reality. Read more here.

If you’ve been following Social Security news, you’re probably aware that the program is facing some serious financial problems.

How serious are these problems? Very bad.

Social Security won’t have enough money to keep up with scheduled benefits in the coming years unless lawmakers make changes that allow the program to increase its revenue. The changes could involve additional payroll taxes or changes to the plan’s full retirement age.

If lawmakers can’t find a way to stop Social Security cuts, benefits could be slashed as early as 2033. This is the latest date the plan’s Old Age and Survivors Insurance (OASI) trust fund expects to be able to pay 100% of benefits. Once that fund is depleted, Social Security may have to cut retirement benefits by 21%.

There yes Lawmakers are likely to agree to merge the Social Security Administration’s OASI trust fund with its Disability Insurance (DI) trust fund. If so, pension cuts could be delayed for another year. But once both funds are depleted, pensions could be slashed by 19%.

If the idea of ​​cutting Social Security sounds scary to you, one solution is to compensate by saving for retirement. But unfortunately, the money in your retirement portfolio is not guaranteed to last.

The good news is that there is another option for you to consider for a guaranteed income besides Social Security. If you’re worried that benefit cuts could ruin your senior life, it’s worth exploring this option.

If you’re not familiar with annuities, they are a financial product you purchase through an insurance company that provides a guaranteed income for the rest of your life. The reason annuities are so valuable is that, unlike your savings, you can’t outlive an annuity.

Of course, if you invest your savings very conservatively and withdraw the minimum amount of money each year, you can almost Guaranteed your deposit will not be depleted. But in this case, you could end up limiting yourself to very little retirement income.

An annuity may provide you with more income than a very conservative investment portfolio, allowing you to make the most of your later years.

Even better, some annuities offer the benefit of fixed monthly payments. Having a predictable income is important when you may no longer be working.

To be clear, not all annuities offer fixed payments. But if your goal is to supplement your monthly Social Security check, a fixed annuity may be a good solution for you.

The Social Security Administration will not be forced to cut benefits. Lawmakers recognized that allowing the program to reduce an important source of income could lead to a widespread poverty crisis among seniors. That’s something no one wants, so it’s very likely that lawmakers will prioritize Social Security’s solvency in the coming years.

Still, it’s a good idea to set yourself an income to cover Social Security cuts (just in case). Annuities fit the bill well, so it’s worth learning more about how annuities work and becoming familiar with the different types available.

Of course, annuities are not necessarily a perfect solution. While they can be a great source of guaranteed income, they often have the following disadvantages:

• High fees and commissions

• Liquidity is limited if you want to cancel your contract

• Complex terminology can be difficult to understand

• Inflation risk for annuities that provide fixed monthly payments

The more you know about how annuities work, the easier it will be to decide whether one is right for you.

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