Social Security will not be able to pay full benefits by 2035, at which time trustees predict the program’s reserve funds will be depleted.
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The annual Social Security and Medicare trustees report released on Monday said total costs of the program, including both the old age and disability insurance programs, will exceed income in 2020 for the first time since 1982. That’s two years later than projected last year, but means the program will have to dip into its reserves to cover benefits at that time.
By 2035 those reserves will be depleted, and only 80 percent of benefits will be payable, unless Congress takes action.
Meanwhile, industry groups have already cautioned that benefits are not enough to keep up with rising lifestyle costs, despite the fact that this year retirees received the biggest cost-of-living adjustment in their paychecks since 2012.
The AARP and the Alliance for Retired Americans said the 2.8 percent jump in benefits would not be enough to keep up with increasing expenses related to health care, housing and prescription drugs, presenting a challenge to the many people who rely on the checks to live.
“For today’s retiree, the pension is becoming more and more hard to come by, therefore many of today’s retirees depend on Social Security for a large part of their income stream,” John Iammarino, principal and founder of Securus Financial, told FOX Business.
While individuals of all ages are faced with savings challenges, here are some ways older Americans can supplement Social Security income.
Assess your properties
Bryan Bibbo, an accredited investment fiduciary with the JL Smith Group, told FOX Business it may be helpful to consider downsizing properties. That could mean moving from a house into a condo or a ranch.
“Property taxes, insurance and maintenance costs add up, as maintaining a home is labor intensive,” he told FOX Business. “Smaller properties usually mean lower real estate costs.”
That could be particularly helpful in the wake of the Trump administration’s tax reform law, which implemented a cap on state and local tax deductions at $10,000.
Additionally, if you own a rental property, Iammarino says accessing rental income can be a good way to close the income gap between monthly Social Security payments and lifestyle needs.
Reduce your taxes
It is important to note that supplementing your income could actually trigger Social Security taxes.
Social Security will be taxed at a rate of up to half of benefits when provisional income for single filers hits $25,000 and when it hits $32,000 for a married couple. Up to 85 percent of benefits are taxable when incomes exceed $34,000 and $44,000 for each group, respectively.
Bibbo notes there are strategies people can use to help keep more money in their bank account, including withdrawing cash from after-tax accounts – such as Roth IRAs – instead of taxable accounts. People preparing for retirement can also roll money from a traditional IRA into a Roth account.
Diversify your investments
If you have a diversified investment portfolio, Iammarino recommends retirees take distributions from those assets which can be anything from stocks and bonds to REITs.
Bibbo also says it can be helpful to invest in an annuity, which can provide guaranteed income throughout retirement.
An annuity is a contract between an individual and an insurance company, which provides limited income each year – similar to the structure of Social Security. Buyers pay a premium until they reach the payout phase, and then the annuity starts paying the annuitant.
However, before picking an annuity, investors need to do their due diligence.
“It is important to be aware that not all annuities are created equal,” Bibbo cautioned. “You should review costs, death benefits, and income structures before purchasing.”
Annuities are highly customizable to the unique situation of the individual.
Get a part-time job
For those that need a little extra cash in retirement, Iammarino suggests getting a job.
In 2016, 19 percent of the labor force was made up of individuals over the age of 65, according to the Pew Research Center.
Those working past 65 were more likely to occupy positions in sales, legal, education, business and financial operations than food services, construction or computer and math jobs, Pew found.
The White House devoted a week last October to tapping the senior labor force, which included endorsing skills training to help equip older Americans with the skills required by the modern labor market.
Meanwhile, as the number of older workers in the labor force rises, so do their wages. Data from the U.S. Census Bureau showed that between 1994 and 2005, average monthly wages for those over 65 increased by 80 percent to $4,092. That far outpaced any other age demographic.
Consult a professional
According to Bibbo, there are more than 560 different strategies a married couple can employ to collect Social Security based on their specific needs. Therefore it can be helpful to consult a professional to ensure you are getting the most out of your situation.
This article was initially published on 10/18/18, it was updated on 4/24/18.