social security benefits

The Future of Social Security

The Social Security Administration periodically analyzes the program’s financial security and adjusts various factors to ensure its sustainability for the long-term. However, it’s suggested by many reports that it will suffer a benefit reduction.

It’s no surprise, therefore, that most millennials have said they won’t factor Social Security into their strategy for retirement. After all, they’ve been hearing for several years that the retirement and disability program is going to break down. This belief is based on a number of predictions. For example, the most recent Social Security Trustees Report tells us that Social Security’s trust fund reserves will be depleted by 2033.

If the trust fund runs out of money, the program’s 67 million beneficiaries would experience a benefit cut. And, experts say those cuts could negatively impact on millions of older Americans.

A number of people, though, have misinterpreted these predictions. For starters, they aren’t by any means certain. The trust fund may deplete, or it may not. But, even if it does, the program will still be able to pay the majority of benefits. Social Security is not going to become completely bankrupt, despite what you may have heard. Unfortunately, this is what a lot of people mistakenly think.

How Would It Affect You?

If the trust fund is depleted, there would be a significant drop in benefits. The value of your benefit, specifically, would drop immediately by about 25%. The Social Security benefit paid to lower-wage earners represents a bigger share of their earnings. And, as a result, a drop would hit lower-income Americans the hardest.

“Currently, retirees who were low earners while working — defined as earning about $30,000 a year while employed — get about 50% of their income replaced from their Social Security benefits. But that would drop to about 40% of replacement earnings in 2033 if the trust fund runs out of money.” High earners, on the other hand, would see their replacement rate drop from 25% down to 20%.

Presently, it seems very likely that the Social Security trust fund will end up running out of money by 2033. However, it may not, assuming lawmakers are able to prevent it. There are a number of potential changes they could make. There are proposals from Democrats, Republicans, and bipartisan committees, all trying to prevent this issue. For example, “Republicans have proposed pushing the retirement age up to 70, effectively cutting between 2 to 3 years of benefits for today’s workers.” 

When to Start Social Security

Many financial analysts suggest that the optimal age to start Social Security benefits is the latest it can possibly be delayed, up to age 70. However, this conclusion is based on the assumption that benefits won’t be reduced in 2033.

When you should start taking Social Security depends, really, on your individual situation. If you want to figure out what the answer is for yourself, specifically, though, you can use Open Social Security. Open Social Security is a free online tool that analyzes optimal claiming strategies.

Analyses by Open Social Security are based on the assumption that users will live to their expected lifespans. However, for those who unexpectedly live longer, it’s recommended that they delay the start of benefits longer than they would otherwise. But, of course, your longevity can’t be predicted.

Here are some examples of different individuals, and what type of strategy they should apply when it comes to Social Security benefits.


Firstly, a man and a woman both turning 62 this year. For a married couple turning 62 this year, the optimal age for the husband to start benefits is 70, and for the wife, it’s one month after turning 62. This strategy hasn’t been affected by the possibility of a benefit reduction.

For a single man turning 62 in 2023, meanwhile, he should start at the age of 67 years, eight months. The assumed benefit reduction would change this, instead making it optimal for him to file right away. For a single woman, meanwhile, it went from 68 years, eleventh months, to 67 years, seven months.

One factor to consider, though, with all of these analyses, is whether you claim Social Security benefits as soon as possible, or delay them for any amount of time, you won’t escape a benefit reduction, assuming it happens. However, you can make the best of a bad situation: It’s better to only get three-quarters of a larger benefit amount than three-quarters of a small one.

What You Can Do

Social Security Benefits will form the bedrock of your strategy going into retirement. For this reason, it’s worth your time considering the perfect strategy for when to claim Social Security. This should be done, regardless of your current circumstances. And, regardless of your level of optimism or pessimism when it comes to if lawmakers will take responsible action and be able to prevent this hypothesized benefit reduction.

However, Social Security won’t keep you covered in retirement completely, regardless of how you choose to handle it. Social Security benefit only accounts for about 40% of the income you’ll need in order to keep your head above water in retirement. In retirement, statistics show that you’ll need 70% to 80% of the income you were receiving while working. But, fortunately, there are other sources of income you can use to help yourself get by.

Are you concerned about whether or not you have enough to retire? If you are, and would like to learn more, then reach out to us at Retallick Financial Group. We’re always here to help.

Sources: Forbes, CBS

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