Social Security Could Be Cut in 2032 - Here Are 5 Things Retirees Should Do Before Then

No matter how well you've prepared for retirement, there's one potential hiccup that could get in your way – Social Security cuts. And unfortunately, those cuts could be coming sooner than expected.

Earlier this year, the Social Security Trustees reported that the program's Old-Age and Survivors Insurance (OASI) Trust Fund is expected to run out of money by the fourth quarter of 2032. Social Security can still pay benefits once the OASI Trust Fund no longer has money, but the program is not expected to take in enough revenue to keep up with those benefits in full. As such, recipients could be in for a 22% benefit cut in roughly six years.

Even though Social Security cuts aren't a given, it's important that retirees prepare for them by doing these things.

Reduce spending

A lot of people think they're living their most frugal lives only to discover after taking a closer look that there's room in their budgets to cut back. Since Social Security cuts may be coming, now's a good time to reduce spending so you can bank some savings or boost the savings you already have.

Review your bank and credit card statements and write down every single expense you find. You may discover a streaming service you rarely use or an old subscription you forgot to cancel. Even if that only translates to $10 or $12 per month in savings, over the next six years, not spending the extra money and banking it instead could add up.

Downsize your home

Your home might be your biggest expense in retirement, but also, your biggest asset. If you have a lot of equity in it, downsizing could help you not only reduce property taxes, insurance, and maintenance costs, but also leave you with money to save and invest.

Let's say you own your home mortgage-free and you can walk away with $500,000 after real estate agent fees by selling it. If you're able to replace it with a $400,000 home, that's $100,000 you can put into various investments that can serve as supplemental income. Just as importantly, if your new home is smaller, your property tax bill may be lower, and your utility costs could shrink.

Look at relocating

Some parts of the U.S. are more expensive on a whole than others. If you're worried about Social Security cuts, one thing it pays to do is explore options for relocating to an area where your benefits might go further.

The nice thing about Social Security is that you get the same monthly benefit no matter where you live. If there's an area that offers cheaper housing, gives you a walkable neighborhood so you don't need a car, and has more access to food and healthcare, it could be worth making a move.

Explore options for going back to work

If you need your entire Social Security check to cover your costs and you don't have savings or a home with equity to downsize out of, working part-time could be an effective way to bank some funds in case benefit cuts happen. And the good news is that you're allowed to work while collecting Social Security.

However, if you haven't reached full retirement age (FRA), know that you will be subject to an earnings test. If you make too much money from a job, you could have some of your Social Security benefits withheld temporarily.

The earnings test limit this year is $24,480 if you won't reach FRA at all, or $65,150 if you'll reach FRA by the end of the year. These limits tend to adjust annually. So if you're going to start working soon and plan to do so in the new year, make sure to review 2027's limits once they're released. That typically happens along with a cost-of-living adjustment announcement in October.

Rethink your investments

You may have a portfolio of safe investments that you use to supplement your Social Security benefits. If your money is in very conservative assets like cash and bonds, your portfolio may not grow so much, making its usefulness more limited.

With potential Social Security cuts looming, now's the time to think about putting some of your assets into stocks if you aren't investing in the market already. Keeping a modest portion of your portfolio in stocks could help your money grow more efficiently in retirement, giving you more options in case cuts happen.

Bottom line

Social Security cuts are not a given. Lawmakers have several options to prevent cuts. But it's best to prepare for potential cuts so that if your Social Security checks shrink, you'll have a backup plan in place.

That plan could entail different things. Whether your goal is to cut spending, downsize, relocate, return to work, or start investing in stocks, the key is to take action now. That way, you'll have more time to prepare for a financial shakeup if lawmakers are unable to prevent Social Security from having to reduce benefit checks broadly.

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Author Details

Maurie Backman

Most retirees will make their Social Security claiming decision exactly once, which is why Maurie Backman has spent more than 20 years helping them understand it. She covers benefit calculations, COLA forecasts, and the policy changes that quietly reshape what retirees receive each month. Her work has appeared in Kiplinger, The Motley Fool, 24/7 Wall St., Bankrate, and U.S. News & World Report.