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It doesn\u2019t matter if you\u2019re 66 or 6 (you\u2019re going places if you\u2019re reading this at 6!), Social Security will matter for you. Unfortunately, the program is barreling down a path that could render it less effective.<\/p>\n
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This is because current workers\u2019 payroll taxes fund retirees\u2019 checks. This model works when you have a strong and healthy working-age population in higher numbers compared to the retired population. However, once you have a high number of retirees and a not-so-high number of workers, this model starts to fall apart.<\/p>\n
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Judgment day is approaching because the Congressional Budget Office penciled it in for 2032. Social Security\u2019s retirement trust fund has six years before it runs dry, and then it starts cutting checks for everyone.<\/p>\n
\nWhat does judgment day mean for you?
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Social Security has a buffer, which is the Old-Age and Survivors Insurance Trust Fund. This trust fund holds $2.3 trillion in special-issue Treasury securities as of the most recent update. When payroll-tax revenue comes in lower than current benefit obligations, the program needs to draw from this fund to cover the gap.<\/p>\n
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Surprise, surprise, that has been the case every year since 2010. And yes, it has been almost 17 years since then.<\/p>\n
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Social Security does not feel broken just yet due to that trust fund, but it could break suddenly.<\/p>\n
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So what happens when the fund runs out?<\/p>\n
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Incoming payroll taxes will cover 77% of total scheduled benefits, and the law triggers an automatic, across-the-board cut of about 23-28% on every retiree\u2019s check the day after depletion.<\/p>\n
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Your Social Security check is going to go down from $2,000 to $1,440. And by then, the cost of living is probably not going to cooperate either.<\/p>\n
\nThe doom loop that might be coming
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Social Security\u2019s annual cost-of-living adjustment is tied to a measure called the CPI-W. When inflation goes up, the COLA goes up. It\u2019s good for keeping Social Security beneficiaries up to speed with the cost of living, but when inflation is high, the fund drains that much faster. Not only that, COLA increases the money you get during periods of inflation, but it does not decrease your checks during deflationary periods.<\/p>\n
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If this AI boom does lead to a once-in-a-lifetime deflationary environment, it\u2019s going to lead to a very interesting outcome for Social Security beneficiaries.<\/p>\n
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If not, it could lead to a doom loop, through tariffs, wars, and interest rate cuts. Trump has long pounded the table for rate cuts, and in tandem with higher oil prices and tariffs, could lead to a second wave of inflation and make Social Security\u2019s woes even worse.<\/p>\n
\nTrump is also the solution
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Social Security\u2019s \u201cTrump Bump\u201d isn\u2019t something you should take for granted. If you\u2019re already retired and eligible, you could invest portions of it in the Trump bull market or in dividend stocks if you wish to play it safer. You will be much better prepared to face a potential Social Security cut in the coming years with a solid stock market portfolio.<\/p>\n
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If you are not a retiree, the coming decades are going to be tough with AI and welfare cuts across the board. People used to find their niche and stay in that lane for decades until retirement, comfortably making enough to retire even without Social Security. That\u2019s may no longer be the case due to AI and potential Social Security cuts.<\/p>\n
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