social security benefits

Social security benefits

The Future of Social Security

The Social Security Administration periodically analyzes the program’s financial security, adjusting various factors to ensure its ongoing sustainability. However, it’s been suggested by many reports that it will suffer a benefit reduction in 2033. 

Therefore, it’s no surprise that most millennials have said they won’t be factoring 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, which tells us that Social Security’s trust fund reserves will be depleted by 2033 (one year earlier than what they estimated last year.) 


Some people, namely younger Americans, have some misunderstandings about what the impact will be if the trust fund does indeed bust. Hopefully, we can clear them up. 

For starters, this prediction isn’t by any means certain. The trust fund may not deplete. But even if it does, the program will still be able to pay the majority of benefits: A number of people misinterpret reports, believing that Social Security will become completely bankrupt. They think that they won’t receive any benefits at all. However, rest assured, this is absolutely not the case.

Still, though, if the trust fund runs out of money, the program’s 67 million beneficiaries would experience a benefit cut. And, according to experts, those cuts could still have a devastating impact on millions of older Americans.

If the trust fund is depleted, there’d be an immediate drop in benefits, by around 25%. The Social Security benefits paid to lower-wage earners represent a bigger share of their earnings: Because the system is designed this way, a drop would hit low-income Americans the hardest.

How Would It Affect You

“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, meanwhile, would have their replacement rate drop from 25% only down to 20%.

Presently, it seems very likely that the Social Security trust fund will run 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. Proposals from Democrats, Republicans, and bipartisan committees alike, have all been made, trying to handle 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 ideal age for starting Social Security benefits is the latest it can possibly be delayed, up to age 70. However, this statement is based on the assumption that benefits won’t be reduced in the future. Assuming it does, where do you stand? When to start taking Social Security depends on your individual situation. You can figure out the answer for yourself, specifically, using Open Social Security. Open Social Security is a free online system that analyzes optimal claiming strategies. 


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

Here are a few examples of different individuals, and what type of strategy they should apply when it comes to Social Security benefits. Firstly, let’s say there’s a married couple, a man and a woman both turning 62 this year. For them, the ideal claiming strategy is for the husband to start benefits at age 70. The wife, meanwhile, should claim benefits at age 62 and one month. 

For a single man turning 62 this year. he should start taking Social Security at the age of 67 years and eight months. The assumed benefit reduction would change this, instead making it optimal for him to file right away.

A single woman’s optimum filing age, meanwhile, went from 68 years and eleven months old, to 67 years and seven months old. 

What You Can Do

One factor to consider with all of these analyses, though, is that whether you claim Social Security benefits as soon as possible, or you delay them for any amount of time, you won’t escape a benefit reduction. However, if the benefit reduction does happen, you can still 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 smaller one. 

For many retirees, Social Security Benefits will form the bedrock of their financial security in retirement. So, it’s well worth your time to consider the perfect Social Security claiming strategy. This should be done, regardless of your circumstances or your level of optimism or pessimism when it comes to what lawmakers will take responsible action and be able to prevent this prophesized benefit reduction.

Social Security won’t keep you completely covered in retirement, though, regardless of what you do. Basically, it only accounts for around 40% of the income you’ll need to get by in retirement. And statistics show that you’ll need an income source providing 70% – 80% of what your income was while working in order to get by. However, fortunately, there are other sources of income you can use to help yourself. Do you have enough to retire?  If you’re worried about if you’ll have enough and would like to learn more, contact us. We’re always here to help.

Sources: Forbes, CBS

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