4 ways your Social Security benefits are being reduced

By the time working Americans retire, a majority will be, in at least some capacity, reliant on Social Security income to make ends meet. Currently, more than three out of five seniors rely on their monthly payout for at least half of their income, without around a third (34%) leaning on the program for at least 90% of their income. Future retiree reliance is expected to be a bit lower, according to a Gallup survey, but still substantial.

However, America's most important social program is on shaky ground, and it's today's working Americans, along with pre-retirees, who could wind up paying for it. Whether you realize it or not, there's not one, two, or three, but up to four different ways your Social Security benefits could be reduced in the years and decades to come with virtually no action by lawmakers on Capitol Hill.

1. Full retirement age increases reduce aggregate payouts

Back in 1983, the Reagan administration passed the last major overhaul of Social Security. Facing a long-term actuarial deficit that was only about a third as big as it is now, the Amendments of 1983 introduced new means to generate income, as well as long-term ways to reduce the costs of the program. One of the means to control the latter was a gradual increase in the full retirement age.

Your full retirement age is the age, determined by your birth year, at which the Social Security Administration deems you eligible to receive 100% of your full retired-worker benefit. If you claim benefits prior to reaching your full retirement age, you effectively accept a permanent reduction in your monthly payout. On the other hand, if you wait until after your full retirement age, you can actually further boost your monthly stipend.

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