{"id":185071,"date":"2025-10-06T16:35:49","date_gmt":"2025-10-06T22:35:49","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=185071"},"modified":"2025-10-06T16:36:27","modified_gmt":"2025-10-06T22:36:27","slug":"what-real-estate-investors-need-to-know-about-the-proposed-social-security-reforms","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/what-real-estate-investors-need-to-know-about-the-proposed-social-security-reforms","title":{"rendered":"Social Security Reforms Could Be on the Way\u2014Here’s What Real Estate Investors Need to Know"},"content":{"rendered":"\n

As of 2025, the Social Security Administration revised its <\/span>insolvency forecast to 2032<\/span><\/a>. <\/span><\/p>\n\n\n\n

It won\u2019t actually go bust, of course. But it also can\u2019t continue on its current course of benefits and revenue. Something will have to give, and politicians from both parties have proposed solutions\u2014none of them good news. <\/span><\/p>\n\n\n\n

So what are these proposed Social Security reforms, and how am I preparing for them personally?<\/span><\/p>\n\n\n\n

Proposed Fixes for Social Security<\/span><\/h2>\n\n\n\n

Like all government overspending problems, the solutions come in two flavors: spend less, or tax more. <\/span>In reality, the government will <\/span>probably<\/span> combine both.<\/span> <\/span><\/p>\n\n\n\n

Here are the proposals <\/span>most likely to <\/span>actually<\/span> happen<\/span>.<\/span><\/p>\n\n\n\n

Cut benefits<\/span><\/h3>\n\n\n\n

The simplest option on the table is <\/span>just<\/span> to pay out less in benefits.<\/span> That\u2019s not exactly a popular move for the millions of us who have paid far more into the system than we\u2019ll ever get back. Although that will likely prove true no matter what, it\u2019s just a matter of extent.<\/span><\/p>\n\n\n\n

Slower COLA increases<\/span><\/h3>\n\n\n\n

Surprise! <\/span>The SSA has <\/span>already<\/span> been<\/span> doing this for years<\/span><\/a>.<\/span> By raising the cost-of-living adjustment (COLA) more slowly than real inflation (purchasing power), they\u2019ve managed to delay Social Security\u2019s insolvency. <\/span>The <\/span>next<\/span> COLA announcement for 2026 <\/span>will come out Oct.<\/span> 15, based on third-quarter inflation numbers, and <\/span>is widely <\/span>expected<\/span> to be under 3%.<\/span><\/p>\n\n\n\n

Raise the full retirement age to 69<\/span><\/h3>\n\n\n\n

In 1983, Congress <\/span>put in place<\/span> changes that raised the full retirement age from 65 to 67 over <\/span>the course of<\/span> decades.<\/span> We don\u2019t have decades this time around, but Congress has proposed raising it once again from 67 to 69. <\/span><\/p>\n\n\n\n

Honestly, this<\/span> one makes sense.<\/span> When Social Security <\/span>was first created<\/span> in the 1930s, the average life expectancy was just <\/span>58 for men and 62 for women<\/span><\/a>. In other words, we weren\u2019t planning on paying for many seniors to live very long. <\/span>Today, life expectancy is <\/span>around<\/span> 76 for men and 81 for women<\/span><\/a>, and the ratio of seniors to workers has <\/span>plummeted<\/span>.<\/span> <\/span><\/p>\n\n\n\n

Means-test recipients<\/span><\/h3>\n\n\n\n

The government could cut or deny Social Security benefits for higher-income seniors, <\/span>despite the fact that<\/span> they paid the most into the system throughout their careers.<\/span><\/p>\n\n\n\n

Raise FICA taxes<\/span><\/h3>\n\n\n\n

Workers and employers pay a combined 15.3% toward Social Security and Medicare taxes. Uncle Sam could, of course, take more of your paycheck and make it even more expensive for companies to hire and keep workers.<\/span><\/p>\n\n\n\n

Remove the cap on FICA <\/span>taxes<\/span><\/h3>\n\n\n\n

The SSA caps <\/span>how much<\/span> retirees can receive in benefits, and the government also caps <\/span>how much they tax<\/span> workers for FICA taxes.<\/span> That cap could disappear for higher earners, so they pay an unlimited amount into the system, despite being capped on what they could ever receive. <\/span><\/p>\n\n\n\n

How I\u2019m Preparing<\/span><\/h2>\n\n\n\n

Now that you\u2019ve gazed into the future and wrapped your head around lower benefits and higher taxes than what your parents enjoyed, how should you prepare?<\/span><\/p>\n\n\n\n

Don\u2019t count on Social <\/span>Security<\/span><\/h3>\n\n\n\n

You\u2019ll likely get <\/span>some <\/span><\/em>Social Security benefits. They just won\u2019t be as juicy as they have been for the last 90 years. <\/span>And even<\/span> with full benefits, Social Security is only designed to replace 40% of your preretirement income.<\/span> <\/span><\/p>\n\n\n\n

Still, today\u2019s workers under 50 probably shouldn\u2019t budget for Social Security benefits at all, given all the uncertainty around their future. I\u2019m not counting on them. <\/span><\/p>\n\n\n\n

Higher earners might find themselves as convenient political targets, and could conceivably receive no benefits <\/span>at all<\/span> due to means testing.<\/span> <\/span><\/p>\n\n\n\n

Plan to work <\/span>longer<\/span><\/h3>\n\n\n\n

With lower benefits in store, you may need to keep earning money later in life. Which, let\u2019s get real, is a reasonable price for living longer. If someone gave you the choice between a life expectancy of 58 versus 76, with the caveat that you\u2019d have to keep working and paying your own bills up to age 70, which would you choose? <\/span><\/p>\n\n\n\n

A more aggressive investing portfolio<\/span><\/h3>\n\n\n\n

I was appalled to learn that my sister had 40% of her portfolio in bonds, at the ripe old age of 35. <\/span><\/p>\n\n\n\n

You\u2019ll need more money in retirement, and that retirement might be further away than you\u2019d planned. To me, the calculus looks pretty simple: Invest more aggressively.<\/span><\/p>\n\n\n\n

I <\/span>personally<\/span> have around half of my portfolio <\/span>in<\/span> stocks and <\/span>half<\/span> in passive real estate investments.<\/span> I <\/span>hope<\/span> to <\/span>earn<\/span> a long-term average of 8% to 10% on my stock investments and 12% to 18% on my real estate investments.<\/span> <\/span><\/p>\n\n\n\n

For example, in the co-investing club of peers that I help organize, we invested last month in a property currently <\/span>paying<\/span> 9.3% in distributions, <\/span>projected for<\/span> a <\/span>22.4%<\/span> annualized return.<\/span> This month, we\u2019re reinvesting in a land fund that has paid out 16% in distributions <\/span>like clockwork<\/span>.<\/span><\/p>\n\n\n\n

These types of investments help me grow my own portfolio much faster than the average person who\u2019s bogged down prematurely in bonds. <\/span>In fact, I <\/span>actually<\/span> invest in real estate as an alternative to bonds in my own portfolio, although <\/span>in<\/span> the three to five years before I retire<\/span>, I\u2019ll probably move some money into bonds<\/span>.<\/span> <\/span><\/p>\n\n\n\n

Diversifying to mitigate risk<\/span><\/h3>\n\n\n\n

\u201cBrian, your portfolio sounds high risk.\u201d<\/span><\/em><\/p>\n\n\n\n

As a working-age adult, I can handle some risk. When the stock market crashes, that\u2019s basically a Black Friday sale for me to buy stocks at a discount. I don\u2019t need to sell stocks anytime soon. <\/span><\/p>\n\n\n\n

Even so, one way I mitigate risk is through diversification. <\/span>In my stock portfolio, <\/span>that<\/span> means buying both international and domestic stocks, large-cap and <\/span>small<\/span>, <\/span>in<\/span> every sector.<\/span> You don\u2019t need to become a stock wizard to do that. <\/span>Just use<\/span> a <\/span>roboadvisor<\/span> or <\/span>buy shares<\/span> in the Vanguard Total Stock Market Index Fund (VTI) and the Vanguard FTSE <\/span>All World<\/span> Excluding US Fund (VEU).<\/span> <\/span><\/p>\n\n\n\n

On the real estate side, I invest just $5,000 at a time, every month, as a form of <\/span>dollar-cost averaging<\/span><\/a>. <\/span>Our co-investing club meets <\/span>every month<\/span> to vet<\/span> a <\/span>new passive <\/span>investment<\/span>, <\/span>whether that\u2019s a<\/span> private <\/span>partnership<\/span><\/a>, <\/span>syndication<\/span>, private <\/span>fund<\/span>, <\/span>or<\/span> secured private <\/span>note<\/span>.<\/span> We all analyze the risk together, and each person can invest small amounts. That lets us diversify across states, operators, asset classes, and payback timelines. <\/span><\/p>\n\n\n\n

I <\/span>even<\/span> added a little precious metal to my portfolio <\/span>recently<\/span>.<\/span> While you won\u2019t get rich investing in gold, it helps protect your portfolio from inflation, geopolitical risk, and stock market crashes. <\/span><\/p>\n\n\n\n

\u201cPrecious metals provide retirees with a tangible hedge against market volatility,\u201d notes Jesse Atkins, director of market research for <\/span>SEMAFO Gold<\/span><\/a>, in a conversation with BiggerPockets. Investing in gold also protects against the U.S. government inflating away its debts, which <\/span>keep ballooning<\/span>. <\/span><\/p>\n\n\n\n

Plan for higher tax rates<\/span><\/h3>\n\n\n\n

The current <\/span>debt-to-GDP ratio<\/span><\/a> in the U.S. is a worrying 119%. <\/span><\/p>\n\n\n\n

Ultimately, the government can\u2019t keep overspending forever. Sooner or later, it will have to get serious about either cutting spending or raising taxes, and probably both. \u201cTax rates will almost certainly rise again in the future,\u201d explains tax attorney and CPA Chad Cummings of <\/span>Cummings & Cummings Law<\/span><\/a> in a conversation with BiggerPockets. \u201cThat could happen as soon as post-2026 midterm elections.\u201d<\/span><\/p>\n\n\n\n

It\u2019s a double whammy that could hit us in our golden years: higher taxes <\/span>and <\/span><\/em>lower Social Security benefits. <\/span><\/p>\n\n\n\n

Take advantage of relatively low tax rates now by <\/span>taking<\/span> the <\/span>hit on<\/span> capital gains tax<\/span><\/a> for<\/span> assets you want to sell or <\/span>making<\/span> Roth conversions.<\/span> <\/span><\/p>\n\n\n\n

Max out Roth accounts<\/span><\/h3>\n\n\n\n

If you agree that tax rates will rise in the future, then it makes sense to knock out taxes now and let your investments compound tax-free. <\/span><\/p>\n\n\n\n

Consider maxing out your Roth IRA and opting for a Roth 401(k) if you have access to a workplace account. As touched upon, you can also convert your traditional IRA or 401(k) funds to Roth accounts. That triggers a one-time tax payment now, but you\u2019ll never pay taxes on the money again, no matter how much it grows. <\/span><\/p>\n\n\n\n

Many of my fellow members of the co-investing club invest in Roth self-directed IRAs. Their balances <\/span>keep exploding<\/span> in value, and they\u2019ll never pay another cent in taxes on it to the IRS. <\/span><\/p>\n\n\n\n

The less you lose to taxes in retirement, the better you can withstand lower Social Security benefits. <\/span><\/p>\n\n\n\n

As a final thought, Cummings <\/span>adds<\/span> that if the government <\/span>starts<\/span> means-testing recipients and <\/span>restricting<\/span> Social Security benefits to higher earners, Roth accounts can help protect them.<\/span> \u201cFuture income-based benefit cuts may use modified adjusted gross income as a threshold. Roth withdrawals do not count toward MAGI,\u201d he adds.<\/span><\/p>\n\n\n\n

Explore cost-of-living contingency <\/span>plans<\/span><\/h3>\n\n\n\n

My family and I <\/span>lived abroad for 10 years<\/span><\/a>, and I can tell you firsthand that the quality of life is just as high, but the cost of living is far lower. <\/span><\/p>\n\n\n\n

Just four months ago, I was living in a three-bedroom apartment with a 180-degree view of the Pacific Ocean in Lima\u2014a city with 11 million residents\u2014and paying $1,300\/month in rent. And yes, it was a great neighborhood, with trendy caf\u00e9s on every corner. The cost of living in Lima is <\/span>65% lower than in Los Angeles<\/span><\/a>, for example. <\/span><\/p>\n\n\n\n

If the U.S. becomes too expensive or politically fractious, we can always move back to Peru, Brazil, the UAE, Italy, Romania, or any number of other countries we love, where our dollars stretch farther than they do in the U.S. <\/span>In fact, my family and I have long-term residency in Brazil through 2030, although <\/span>it\u2019s<\/span> easy to <\/span>get<\/span> a digital nomad visa in many countries <\/span>nowadays<\/span>.<\/span> <\/span><\/p>\n\n\n\n

Nor do you have to move overseas to enjoy a lower cost of living. Ditch the average <\/span>$1,240,382 San Francisco home<\/span><\/a> to enjoy a $247,197 average home in Kansas City. You\u2019ll still enjoy all the amenities of a major city while paying a fifth of the cost to live there. <\/span><\/p>\n\n\n\n

Today\u2019s Workers Will Foot the Bill<\/span><\/h2>\n\n\n\n

For 90 years, retirees have enjoyed generous Social Security benefits. But with fewer babies being born and workers paying into the system, Social Security can\u2019t continue on the same trajectory. You won\u2019t get out anywhere near what you paid into the pyramid. <\/span><\/p>\n\n\n\n

Plan to cover your own living expenses in retirement, with returns from your own investments. Plan on higher taxes, too, while you\u2019re at it, in case the future feels too cozy. <\/span><\/p>\n\n\n\n

Up your game as an investor, because you\u2019re going to need more than you think.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

As of 2025, the Social Security Administration revised its insolvency forecast to 2032.  It won\u2019t actually go bust, of course. But it also can\u2019t continue on its current course of […]<\/p>\n","protected":false},"author":158586,"featured_media":185068,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7384],"tags":[],"class_list":["post-185071","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-politics-policy"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/185071","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/158586"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=185071"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/185071\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/185068"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=185071"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=185071"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=185071"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}