‘If we wait, will it even be there?’ What I’m hearing from retirees about Social Security

Last week I met with a couple I'll call Jeff and Julie, both age 62. Julie had purchased a Social Security claiming analysis for the two of them, and before we started, I asked: "Why did you decide to do this?" Her answer had almost nothing to do with maximizing benefits.

"Ray, I read. And everything I've been reading about what's happening with Social Security makes me nervous. If we wait until we are 70 to file, will it even be there?"

Here is my advice: Don't file at 62 because you're afraid Social Security will disappear. A frightening headline is not a claiming strategy. I understand why Julie is nervous. I do not agree that claiming now is the answer.

Most of my clients are affluent and can afford to wait. Yet nearly every client I have met with this year has expressed anxiety about whether Social Security will be there. Many are considering claiming early, not because the math says to, but because they are afraid to wait. They are trying to protect themselves. My job is to challenge whether the decision actually does that.

Start with 2032. If that feels uncomfortably close, that's because it is. In retirement-planning terms, it is practically next Tuesday. The Social Security Trustees project that the Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivor benefits, will deplete its reserves in the fourth quarter of 2032 under current law. Continuing income would initially cover about 78% of scheduled benefits.

That is a financing shortfall, not an expiration date. Payroll taxes would keep coming in. Social Security would not disappear. But a potential 22% shortfall is real money, and for Jeff and Julie it arrives before their first retirement check at 70. Telling them not to worry is not an answer.

The administrative news doesn't help. In a September audit examining fiscal 2023 cases, SSA's Office of Inspector General found that 46% of the retirement, survivor and disability overpayment notices it reviewed failed to meet agency requirements. Some contained inaccurate amounts. Others omitted information about reconsideration and waiver rights.

If SSA were playing baseball, a .540 batting average would get it into Cooperstown. But these are notices telling people they owe money back. So, being correct 54% of the time is truly abject failure.

Julie concluded, "So, we need to file now and get our money now." That is where I push back. Being right about the problem does not make you right about the solution. Filing early does not protect your future checks from a funding shortfall.