A Looming Six-Figure Limit on Social Security: What Retirees Must Do Now

Headlines have been rife with the projection that Social Security is nearing insolvency. The thought is understandably concerning for many retirees and soon-to-be-retirees.

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Among the possible suggestions to address the funding issue is a recent proposal to place a cap on what some recipients can receive. Per the Committee for a Responsible Budget (CRFB), “The Six-Figure Limit (SFL) would set a $100,000 cap on the total benefit a couple retiring at the Normal Retirement Age (NRA) can receive starting this year.” If you’re single, the cap would be $50,000 annually.

Although this proposal is not law, here are some things retirees could consider doing now.

Understand Your Exposure

Not every recipient is exposed to the possible SFL. Per the CRFB, 0.05% of couples would be impacted at first. Such an impact would affect only the very top-tier of beneficiaries, not the typical retiree.

Using tools like the Social Security Quick Calculator can help Americans understand their anticipated benefit if they’re not already on Social Security. Benefits are based on lifetime indexed earnings, so you may not even be exposed if you weren’t making a high income for your entire career.

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Consider Your Filing Timeline

Delaying claiming Social Security is a good way to maximize benefits. Per the Social Security Administration (SSA), delaying claiming after passing full retirement age (FRA) adds 8% annually to benefits until you reach 70.

Recipients near a potential cap may not receive much benefit by delaying. Consider coordinating with your spouse on when to claim or analyze what you’d receive. If delaying puts you at risk, you could consider claiming earlier.

Rebalance Retirement Income Sources

A potential cap might drive higher-income people to view Social Security differently, as a supplement and nothing more, according to Reason. For affected Americans, greater reliance on tax-advantaged retirement accounts such as 401(k) plans or IRAs could be helpful.

That may not cover your full needs in retirement, though. Building a dividend portfolio or creating a bond ladder could all help create income streams in retirement to offset a possible reduction in benefits.

Work With a Financial Advisor

Retirement planning generally involves multiple moving pieces, and claiming Social Security is an important part of that. Working with a financial advisor now provides an objective pair of eyes to the possible fallout of an SFL on your situation.

A financial advisor can also stress-test your portfolio in light of benefit reductions to account for market swings, longevity risk and increased healthcare costs. They can also help manage your portfolio to mitigate tax consequences.

The SFL isn’t a given, but it is a potential reality given the looming insolvency and policy discussions. Higher-income earners can benefit themselves by researching how such an action would limit benefits. Acting earlier may give more control over your financial future.

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This article originally appeared on GOBankingRates.com: A Looming Six-Figure Limit on Social Security: What Retirees Must Do Now