Is Social Security Going Bankrupt? Here's the Truth Every Retiree and Worker Needs to Know.

If you say the words "Social Security" in a crowded room, you might get some interesting reactions. And some of those reactions may be rooted in fear.

There are rumors flying that Social Security is on the verge of going bankrupt. And that's a scary thought, not just for the millions of people who collect those monthly benefits already, but also for today's workers who hope to collect Social Security once they're ready to retire.

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The truth, though, is that Social Security is not at risk of disappearing. But benefit cuts can't be ruled out. And that's something everyone needs to prepare for.

What's really happening with Social Security

Social Security can't go bankrupt because its primary revenue stream is taxes on wages. But Social Security is facing a financial shortfall in the coming years that could result in broad benefit cuts.

Social Security's Old-Age and Survivors Insurance (OASI) Trust Fund, which is what retirement benefits are paid out of, is set to run dry in 2033. At that point, only 77% of benefits will be payable, say the Social Security Trustees.

Social Security's Disability Insurance (DI) Trust Fund is in better shape and expected to be able to pay 100% of scheduled benefits through at least 2099. If the OASI and DI Trust Funds were to be combined, collectively, they'd run dry in 2034, after which 81% of benefits will be payable.

These exact numbers are subject to change in the coming years. But the end result is the same.

Social Security is facing the possibility of benefit cuts unless lawmakers come up with a strategy that succeeds in preventing them. And that's something that needs to be on your radar -- whether you're working or already retired.

How to prepare for Social Security cuts

It's important to do what you can to brace for reduced Social Security benefits. And if you're still working, that's probably a much easier thing than if you're already retired.

If you're still working, boosting your IRA or 401(k) contributions is a great way to make up for potential Social Security cuts. You can also look to delay your Social Security claim past full retirement age for boosted monthly benefits. That way, if benefits are slashed, you'll have a larger baseline to start with.

If you're already retired, coping with Social Security cuts may be harder. But you still have options.

You could reduce spending in the coming years to preserve more of your nest egg for later. And if you have retirement savings already to supplement those monthly checks, you can work with a financial advisor to tweak your portfolio so it's able to generate more income for you.

Another option that may be worth considering is returning to work in some capacity. That may not be ideal if you're enjoying not having a job, but it's a good way to build savings.

Now you may be thinking, "Well, I could always go back to work if Social Security cuts end up happening." But if you're already in your 60s or early 70s, and cuts happen in roughly a decade from now, you may no longer have the energy or ability to hold down a job at that point. So the time to consider working is now.

Although Social Security cuts are a better scenario than the program going bankrupt and stopping benefits completely, they could still be catastrophic for millions of Americans. Hopefully, lawmakers will be able to find a way to minimize or even totally prevent a broad reduction in benefits. But it's important to protect yourself against that scenario by building more of a financial cushion to compensate.

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