How Social Security cuts could affect young workers’ retirement plans

The 2025 Social Security Trustees' Report carries a sobering warning: if no legislative action is taken, Social Security beneficiaries could see an across-the-board 23% cut in benefits starting in 2033. That’s just eight years away.

At the center of this is the depletion of the program’s trust fund. Social Security isn’t “running out of money,” as headlines sometimes imply. But unless funding increases or benefits are adjusted, the program will only be able to pay out what it collects in real time—about 77% of promised benefits.

For retirees close to or already drawing Social Security, this may not result in major changes. Historically, reforms tend to spare those near or in retirement. But for younger workers—especially those in their 20s or 30s—the financial impact over a lifetime could be significant.

Let’s break this down with a tangible example. Suppose you’re 25 years old in 2025 and earning $100,000 per year. You plan to retire at 70, and based on historical wage growth and COLA (cost-of-living adjustment) averages, you’re set to receive approximately $25,232/month in Social Security benefits by 2070, adjusted for inflation.

Now imagine that the projected 23% cut actually materializes in 2033—and that Congress decides not to restore full benefits for younger generations. Your monthly benefit shrinks to $19,428—a $5,800 difference every month for the rest of your life. If we calculate the net present value (NPV) of these future benefits—essentially what they’re worth today—this difference adds up to a lifetime shortfall of $1.24 million.

And that’s just for one person. If you’re married, your household’s total retirement income loss could be closer to $2.5 million in today’s dollars. That’s equivalent to losing an entire retirement nest egg. What’s more, this doesn’t account for rising healthcare costs, longevity risk, or inflation that could erode spending power further.

The takeaway: even if you’re doing everything right—saving, investing, budgeting—a structural shift in Social Security could silently reduce your financial runway. It’s worth planning around that possibility now, while time is still on your side.

It’s tempting to ignore problems that are 40 years away. But financial planning is fundamentally about time—and this issue is about how much of it you still have.

Here’s why this affects younger professionals more than they might expect:

• More years at risk: You’ll experience more years under the new, reduced benefit structure.
• Fewer safety nets: Defined-benefit pensions are rare today. Most of your retirement security will come from your own savings and investment habits.
• Longer life expectancy: The longer you live, the more you’ll depend on fixed income in retirement.
• Time favors planners: The earlier you start adjusting, the less drastic your changes need to be.

In short, you can’t control Congressional decisions. But you can build a plan that works regardless of what happens on Capitol Hill.

Traditionally, Social Security served as one of three “legs” of the retirement stool—alongside employer pensions and personal savings. But with pensions nearly extinct for most private-sector workers, that second leg is increasingly gone. So what’s the right mindset now?

Social Security should be treated as a floor—not a foundation. It can offer some guaranteed income, but your lifestyle in retirement will largely depend on how much you set aside beforehand.

A few practical planning steps:

1. Adjust Your Forecast

Instead of assuming you’ll receive the full amount projected on your Social Security statement, apply a conservative haircut. Use 75% or even 65% of the benefit amount for your long-term models. That way, any actual cuts won’t derail your plan.

2. Maximize Tax-Advantaged Savings

If you’re a US taxpayer, consider fully funding your Roth IRA, 401(k), or HSA where eligible. For Singapore-based professionals, maximize CPF contributions and consider voluntary top-ups to the Special Account (SA), which offers a long-term, stable return.

Starting early compounds your advantage. Even small contributions made consistently in your 20s will outweigh much larger contributions made in your 40s.

3. Anchor With a Timeline

Instead of targeting a retirement “number,” think in terms of monthly income. How much would you need per month to live comfortably in your 70s and 80s? How many years will you likely need that income to last?

In our example, a $5,800/month shortfall could be made up by personal savings or income-generating assets. That’s roughly $70,000/year. If you need to replace that for 25 years in retirement, the total you’ll need is about $1.75 million in future dollars.

Retirement doesn’t happen overnight. And neither does the process of building financial security.

The key here isn’t fear—it’s alignment.

If you’re in your 20s or early 30s, the following actions can help build a resilient retirement strategy even if Social Security changes:

• Automate savings into long-term accounts like IRAs, CPF SA, or SRS.
• Invest for growth, not just safety, especially in early decades.
• Rebalance regularly, but don’t overreact to market noise.
• Track contributions, not just account balance—your inputs matter most early on.

And if you're a parent or older sibling of a Gen Z professional? Now is a good time to start having these conversations about retirement and financial resilience early.

There’s precedent for late-stage Social Security reform. In 1983, Congress implemented a series of gradual changes to rescue the program’s solvency. These included:

• Gradually increasing the full retirement age
• Taxing Social Security benefits for higher earners
• Expanding Social Security coverage to include certain categories of government employees

Critically, those changes protected current retirees and largely affected younger workers. There’s no reason to expect that future adjustments will work much differently.

This means today’s 20- and 30-somethings should prepare for change—not just as a possibility, but as the default.

Social Security cuts shouldn’t provoke panic—but they should prompt recalibration. The most resilient retirement plans aren’t built on optimistic assumptions. They’re built on margin—room for error, flexibility in spending, and conservative income projections that hold up under stress. For young professionals, that means adjusting your baseline now. If your plan works assuming just 70% of your projected Social Security benefit, you’ve already built in protection. If the full benefit arrives anyway, you’ve got a bonus—not a lifeline.

This shift in mindset doesn’t just affect retirement math. It also clarifies your current savings decisions. Should you delay increasing your CPF top-ups? Can you afford to scale back your investment contributions while traveling or caregiving? These are tradeoffs worth considering—but only with a full view of your future income anchors.

Planning for less isn’t pessimism. It’s a form of long-range emotional insurance. It gives you peace of mind when markets swing or policy shifts. And it creates the quiet confidence that you won’t be caught off guard later by changes you can’t control. The smartest financial strategy isn’t based on predicting the future. It’s based on preparing for its uncertainty—and still moving forward with clarity.