If I Could Tell All Retirees 1 Thing About Social Security Right Now, It's This

Social Security can make all the difference for some retirees, with around 60% of retired workers saying they rely on their benefits either "exclusively" or "heavily" as a source of income, according to The Motley Fool's Annual Social Security Cost-of-Living Adjustment Survey.

But between surging inflation and potential benefit cuts on the horizon, Social Security's future is shaky. If I could tell everyone just one thing, it's this: Have a backup plan ready.

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Inflation is outpacing COLAs

Retirees could be on track for a larger-than-average cost-of-living adjustment (COLA) in 2027, but the bad news is that it comes with higher inflation, too.

The Senior Citizens League -- a nongovernmental advocacy group not affiliated with the Social Security Administration -- recently predicted that next year's COLA could be 3.9%. That's substantially higher than last month's estimate of 2.8%.

However, because the COLA is directly tied to inflation, a higher raise means that costs are also surging. And in most years, retirees end up getting the short end of the stick.

The Senior Citizens League also found that despite several record-breaking COLAs in recent years, Social Security benefits have lost nearly 14% of their buying power over the last decade. If this trend continues, it will be much harder for retirees to depend on their benefits as a significant source of income.

Benefit cuts could be coming sooner than expected

Inflation isn't the only problem retirees are facing. Social Security's dwindling trust funds have been a challenge for years, but the issue is becoming increasingly urgent.

A new report from the Congressional Budget Office found that the trust fund covering retirement benefits is expected to run out in just six years, at which point benefits could be cut by around 28%. Lawmakers have long debated exactly how to resolve Social Security's cash shortage, but they're running out of time before benefit cuts become a reality.

To be clear, even if the trust funds run out, Social Security is not going away entirely. The program is funded primarily by payroll taxes, so as long as workers are paying into the system, there will be at least some cash to pay out in benefits. Without the trust funds, though, Social Security will lose a substantial source of income.

What can retirees do?

If you're already retired and Social Security makes up the bulk of your income, your options may be limited. Going back to work at least part-time or picking up a passive income source can help beef up your savings, providing some extra cushion against potential benefit cuts.

This won't be an option for all retirees, and if that's the case for you, simply keeping realistic expectations about how far Social Security will go may be best right now.

For those nearing retirement who haven't yet filed for Social Security, it may be wise to hold off on claiming. Delaying benefits past age 62 will earn you larger checks each month, and the average retiree collects around $850 more per month at age 70 than at 62. If your retirement savings are falling short, that extra cash each month can go a long way.

Social Security's challenges have put retirees in a difficult position, and surging inflation has not made it any easier. No matter what the future holds for the program, having a backup plan can help you prepare.