Warren Buffett once called cutting Social Security a ‘mistake.’ Now the CBO says the hit could be 26% by 2032 — about $543/month off the average check

Fast forward to today, and America’s Social Security retirement trust fund is expected to run dry as soon as 2032. Retirees’ benefits could drop by roughly a quarter once it does, but the exact number depends on which government source you ask. While the trustees anticipate a 22% cut, the Congressional Budget Office (CBO) notes a larger cut, at 26%.

Assuming the latter, and the current average retired worker benefit of $2,088.79, that means a $543 cut to monthly fixed income.

The good news is six years can be enough time to close a gap that size — but only if you start now. Here’s what to consider.

Social responsibility

In his response to shareholders, Buffett compared the Social Security system to the tax credits and incentives provided for children — another group unable to work due to age.

“I think that this is an extraordinarily rich country and that the people in their productive years can take care of those outside in both areas… a rich country takes care of its young and it takes care of its old,” he said at the 2005 Berkshire Hathaway meeting. “We try to provide good schools and health and everything for the young overall as part of our overall responsibility. I believe that a rich country should be doing the same for the older people.”

With benefit cuts looming, society may be falling short of this responsibility and breaking the implicit contract with workers who have paid into the system for decades.

To shore up Social Security, Buffett suggested raising the retirement age and eliminating the income cap on payroll taxes, currently set at $184,500.

However, given the political gridlock surrounding entitlement reform, these changes appear unlikely in the near term. As a result, many Americans may need to take proactive steps to safeguard their financial security in retirement.

Creating your own nest egg

With the future of the social safety net uncertain, it’s wise to build an independent retirement nest egg.