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When it comes to Social Security, advice is essential, but too often clients and recipients rely on antiquated wisdom, if not outright myths.
Clarity and the right Social Security advice is increasingly important at a time when so many pre- and current retirees are fretting about the health of the system. That’s a logical response considering the recently published Social Security Trustees 2026 annual report says the retirement-only trust fund will be out of money in late 2032.
Due to that projection, some retirees are understandably worried about the specter of benefit cuts. Fortunately, that’s not an issue either political party wants to take up. Related to the politics of Social Security, an outright loss of benefits, even amid the flimsy financial health of the systems, seems unlikely in the future.
“It is unlikely that retirement benefits would disappear entirely. Social Security is a popular program, and eliminating it would take an act of Congress,” according to Charles Schwab. “The many policy changes that have been proposed almost all focus on shoring up the program for the long term, not getting rid of Social Security entirely.”
The Political Element in the Social Security Equation
For about three decades, Social Security trustees have been warning about insolvency coming in the 2030s, but politicians haven’t addressed the issue. It’s a curious phenomenon because, in private, they apparently acknowledge the fixes are relatively simple.
The Atlantic recently published an interesting article on the subject with the journalist pointing out that away from the spotlight, both Democrats and Republicans see fixes in slowly lifting the retirement age to 69 from 67, paring “benefits for higher earners, and rais(ing) the annual earnings limit for the Social Security payroll tax to somewhere between $250,000 and $300,000.”
Raising the retirement age is potentially politically divisive because it’d benefit current and near recipients while extending the retirement timeline for current workers. However, there’s likely broad support for the other aforementioned fixes.
Unfortunately, it’s seemingly always an election year and that explains politicians’ kick the can down the road on Social Security fixes, but that road may be coming to a dead end.
“While it is unlikely that major steps will be taken before the 2028 presidential election, shoring up Social Security is likely to be among the most important policy challenges facing the next president when he or she takes office in 2029,” adds Schwab.
Social Security Isn’t Going Anywhere, But…
In what’s likely a relief to many current workers and all retirees, Social Security isn’t going to be eliminated. However, its complexion could change in the future.
Clients and those nearing retirement are aware of possible changes and that means some strategy is required when it comes to deciding when to take Social Security. There’s no one-size-fits-all answer, hence it pays to engage with an advisor on this topic.
“If you are nearing retirement, you may be tempted to claim Social Security benefits as early as age 62 (or sooner if you're disabled), especially if you fear possible future cuts to benefits,” concludes Schwab. “However, claiming early, before your full retirement age, permanently reduces monthly benefits compared with waiting until full retirement age or later (in no situation should you postpone benefits past age 70).”
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