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If you’re counting on Social Security to help cover your housing costs in retirement, it may be time to think of a plan B.
A new report from the Social Security Board of Trustees warns that the program’s main trust fund could be depleted by 2033. At that point, the government would only be able to pay a portion of promised benefits. For retirees already managing tight budgets, the gap could be enough to threaten their ability to stay in their homes.
Housing is often the biggest monthly expense in retirement, especially for those still carrying a mortgage or living in areas with a high cost of living. And with benefit reductions on the horizon, a growing number of older homeowners could find themselves stuck between rising costs and shrinking income.
What’s more, some of the strategies retirees once relied on to shore up their finances—like downsizing or selling a longtime home—come with new risks. A little-known capital gains tax rule that once only applied to wealthy homeowners is increasingly squeezing middle-class homeowners who’ve built up too much equity, turning what used to be a nest egg into a taxable liability.
In this climate, relying solely on Social Security is no longer a safe bet. Whether you’re planning for retirement or are already there, here’s what you need to know and what steps you can take now to protect your home and your financial future.
The problem: Social Security won’t stretch as far
For millions of retirees, Social Security isn’t a supplement—it’s their only income.
About 39% of seniors rely on Social Security as their sole source income, according to a survey from the Senior Citizens League (TSCL). And nearly three-quarters (73%) of seniors depend on Social Security for more than half of their income.
But with the median monthly benefit hovering at around $1,900, many older adults are already stretched thin.
And things could get worse soon. With the Social Security program’s solvency under threat, beneficiaries may only receive 77% of their scheduled payments by 2034. AARP estimates that unless reforms are made, retirees could receive just 81 cents on the dollar in just nine years.
For older homeowners already struggling with soaring costs, this presents a dangerous new reality. A Realtor.com® analysis found that in some U.S. cities, property taxes alone can eat up more than 25% of a retiree’s monthly benefit. And if they try to sell to free up cash, they may face a second hit.
The capital gains tax exclusion once shielded homeowners from paying taxes on the profit of selling their primary home, but the exclusion amount hasn’t changed since 1997, and home prices have surged more than 260% in that time. That means when today’s seniors finally sell, they may owe taxes on hundreds of thousands of dollars in profit they never thought would be taxed.
The result? Many older adults feel trapped, unable to afford their home, yet unable to leave without a financial penalty. And with Social Security benefits potentially shrinking, the margin for error is narrowing fast.
Who’s most at risk
Not all retirees face the same level of financial pressure, but for certain groups, the risk of housing insecurity in retirement is especially high.
While previous generations often entered retirement mortgage-free, that’s no longer the norm. Almost 20% of all mortgages are held by someone 65 or older, meaning that Americans are retiring with mortgage balances still on the books—either because they bought later in life, refinanced to tap equity, or moved during the pandemic housing boom. Monthly payments that once felt manageable can quickly become burdensome on a fixed income.
Seniors who rely solely on Social Security entirely or who have modest retirement savings are also especially vulnerable. A shrinking benefit paired with rising property taxes, insurance premiums, HOA fees, and utility costs can chip away at an already-tight budget.
Without the cushion of a pension, rental income, or other investments, retirees have fewer options to fall back on. That makes them more sensitive to any reductions in Social Security benefits or sudden household expenses.
What you can do now
The uncertain future of Social Security doesn’t mean you’re powerless. With thoughtful planning, today’s workers and retirees can reduce the risk of housing insecurity in their later years. Here’s how:
Run the numbers early
Don’t wait until retirement to understand your financial runway. Project your future income against your expected housing expenses, including your mortgage (if any), property taxes, homeowners insurance, utilities, and HOA dues.
Use online mortgage calculators or consult a financial advisor to build a clear picture and make sure to account for inflation and possible benefit reductions.
Consider downsizing or relocating
If your current housing costs feel unsustainable, downsizing could free up equity and lower your monthly burden. Selling a large, high-maintenance home and buying a smaller, more affordable one can dramatically improve your retirement outlook.
Look for states or cities with lower property taxes, areas with a lower cost of living, and 55+ communities or homes with aging-in-place features.
Eliminate your mortgage if possible
Entering retirement without a mortgage can give you more financial freedom. If feasible, aim to pay off your home loan early by making lump-sum payments or refinancing into a shorter term. Another strategy is to sell your current home and buy a less expensive one in cash, so you don’t have to worry about monthly payments at all.
Watch for policy changes
Congress is still debating how to fix Social Security’s funding gap—whether through raising taxes, cutting benefits, or both. While reforms are likely, the timeline and impact are unclear.
Younger retirees and Gen Xers are most at risk if changes are delayed or phased in gradually.
Keep an eye on proposed legislation, and consider how different outcomes could affect your long-term housing plan.