Trending
With roughly 11,000 baby boomers retiring daily, clients of all ages are right to be concerned about the temerity of Social Security. Predictably, those concerns were amplified with the recent release of the Social Security Trustees 2026 annual report.
Advisors know that clients across the various age cohorts are increasingly savvy bunch, so many are already consuming Social Security-related content. That’s good and bad. Good because it makes for a more informed client base. Bad because people have a tendency to focus on headlines and nuggets,not full context.
That’s particularly true with Social Security news and reports and the latest trustees update definitely contains some data points clients will focus on. For example, the combined Old-Age, Survivors and Disability Insurance (OASDI) trust funds is expected to run out in 2034 – the same expectation seen in the 2025 report.
The other nugget clients are apt to focus is the expectation that the retirement-only trust fund (OASI) will be out of money in the fourth quarter of 2032, slightly worse than the prior estimate of depletion arriving early in 2033. Details matter.
How to Help Clients of All Ages
Advisors know that clients of all ages are worried about the state of Social Security. Current retirees and those close to joining them are concerned that their benefits may be adjusted downward. Likewise, younger clients, say Gen Xers and some older millennials, are wondering if Social Security will be there for them at all.
These are legitimate issues because as advisors know, the primary funding source for Social Security is income tax. So some clients are apt to think with older, presumably higher paid workers leaving the workforce, their contributions to the system aren’t being replaced on a dollar-for-dollar basis. The kind of sort of good news for younger clients is that Social Security will be there for them. In what form is to be determined.
“Even if Congress took no action and the OASI trust fund were depleted in late 2032, ongoing payroll tax revenue is projected to cover roughly 78% of scheduled retirement benefits — or about 83% if the OASI and DI funds were combined (which would require legislation),” notes Pamela Hess, retirement strategist at J.P. Morgan Asset Management. “That payable share is projected to decline gradually over time absent reform.”
As for older clients, Hess notes that fears of benefit cuts should not be an impetus to claim Social Security early because if benefit reductions become a real possibility, Congress is likely to finally take action. After all, politicians love getting reelected and they know seniors are an electorate with which not to trifle.
Myth-Busting Matters
Another Social Security area in which advisors can be forces for good is helping clients get pre-conceived notions out of their heads. As J.P. Morgan’s Hess points out, there are three big Social Security myths that need busting: Social Security is going bankrupt, the depletion date is the most important number and the impossibility of reform.
Regarding “bankruptcy,” what clients are really thinking of is funds being exhausted, not the system going belly-up. Help them gain that clarity. As for the depletion date, it’s arguably a good news/bad news scenario because that date isn’t as important as the long-term financing gap. As Hess points out, that gap has been expanding and policy tinkering may be needed to close it.
When it comes to Social Security, it’s likely to be a heavy lift, but clients should not see that as an impossibility.
“Congress has modified the program multiple times, including the major 1983 reforms, which combined a gradual increase in the retirement age, new taxation of benefits for higher-income recipients, and payroll tax rate increases to extend solvency for decades,” concludes Hess. “Potential levers today include changes to the payroll tax cap, benefit formulas, retirement ages, or some combination. The path forward is uncertain, but policymakers have addressed financing challenges of this kind before.”
Related: Why ETFs Have Two Prices — and Why Investors Should Pay Attention