Ask Rusty: I’m Concerned About Social Security Solvency

Dear Rusty: I retired at age 58. My husband and I worked 40 years of employment each. I had a 401(k) only — no other benefits. We saved, we invested through our financial advisor, and have done okay watching our investments grow (except for the last three years). Neither my husband nor I have taken Social Security; we were both waiting until age 70 to get full benefits. Do you think this is still wise? I’m concerned there will not be any funds in five years when we both turn 70. 

Signed: Concerned Senior

Dear Concerned Senior: Your question relates to Social Security solvency, no doubt inspired by the recent spate of media discussion on this topic. Most articles I’ve read promote a “doomsday” scenario and, in fairness, Social Security’s financial issues are serious. The latest report from the trustees of Social Security warned Congress that the reserves now held in Social Security’s Trust Fund (which enable full benefits to be paid) will be depleted as early as 2033. What you may not know is that this is not new news — the trustees have sounded the same warning for decades to multiple Congresses, which have neglected to enact corrective measures. And, unfortunately, Congress is likely to continue to drag its feet for a while because the reform needed is not politically palatable and the impact is still a few years away. 

Nevertheless, although Social Security’s looming financial issues are serious, they are not fatal. Congress already knows how to fix Social Security’s financial issues — it just currently lacks the bipartisan spirit and political will needed to do so. The clock, however, is ticking and Congress will be forced to act soon, which we are confident will happen before the Trust Funds run dry. What motivates most politicians is getting reelected and allowing an across-the-board cut to all Social Security (SS) recipients (which would happen if the Trust Fund reserves were depleted) would be political suicide. Therefore, I’m confident that reform will occur in time, and I don’t suggest changing your Social Security claiming strategy over worries about Social Security’s solvency. 

Let me further allay your fears by explaining what would hypothetically happen in the worst-case scenario (if Congress doesn’t act and Trust Funds are depleted). If that were to occur, when the reserves are depleted in about 2033, everyone would face an across-the-board benefit cut. Social Security can’t go bankrupt because there would still be about 175 million workers contributing to the program but, since SS (by law) can only pay benefits from revenue received, everyone’s benefit would be reduced by about 23 percent (according to the trustees). Every beneficiary would still get benefits, but only to the extent available from income received. That brings me to your specific question —whether it is still wise to wait until age 70 to claim (or to claim your benefits now). 

Ask yourself this question: which would result in a larger monthly payment, a 23 percent cut to your age 70 SS payment amount, or a 23 percent cut to your current benefit amount? The answer, of course, is that your monthly payment would be more if you stay with your current strategy and wait until age 70 to claim (a plan which I assume you developed considering your current financial needs, as well as your life expectancy, both of which are important to that decision). 

Again, I do not believe the worst-case scenario will happen. Congress already knows how to restore Social Security to full solvency, and it will almost certainly act in time to avoid an across-the-board cut to everyone’s benefit. The Association of Mature American Citizens (AMAC) has proposed legislation that would restore the Social Security program to full solvency for generations without raising payroll taxes — a summary of which you are welcome to review at: www.amac.us/social-security. AMAC has provided this proposal to various members of Congress for consideration.      

Russell Gloor is a national Social Security advisor at the AMAC Foundation, the nonprofit arm of the Association of Mature American Citizens (AMAC). The 2.4-million-member AMAC says it is a senior advocacy organization. Send your questions to: ssadvisor@amacfoundation.org.

Author’s note: This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). The NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity.