Can You Count on Social Security?

Understanding the role it plays in a modern retirement plan

Let’s face it, retirement today doesn’t look like it did 30 years ago.

People are living longer, retiring differently, and navigating more complexity than ever. One of the biggest questions we hear from clients is:

It’s a fair question.

Social Security has been a cornerstone of retirement income for decades, but the program is under real pressure. And while benefits aren’t vanishing overnight, the system is evolving, and your retirement plan needs to evolve with it.

Here’s what to know and what to do next:

A Quick History Lesson (Don’t Worry, It’s Short)

Social Security was created in 1935 as a safety net for retirees. Back then, there were 42 workers supporting each retiree. Today? Closer to 2.8, and that number is shrinking. That’s a problem for a system that depends on current workers funding current retirees.

Add in longer life expectancies and a falling birth rate, and the math starts to look shaky. Without reform, the Social Security Trust Fund is projected to be depleted by 2034. After that, ongoing payroll taxes are expected to cover only 78% of promised benefits.

What Could Change?

There’s no shortage of ideas floating around Washington, including:

• Raising the full retirement age
• Increasing the cap on taxable wages
• Reducing future benefit amounts
• Means-testing based on income and assets

But with little political consensus, don’t expect sweeping reform overnight. That means your best move is to plan based on what we know now, with enough flexibility to adjust as new policies roll out.

Should You Delay Your Benefits?

You can start collecting Social Security as early as age 62, but it comes at a cost. And if you’re still working before reaching full retirement age (FRA), your benefits may be temporarily reduced even further. Once you reach FRA, the earnings limit disappears, and your benefit is recalculated to give you credit for the withheld amounts. On the flip side, every year you delay benefits past your full retirement age, your monthly check increases by 8%, up until age 70.

Here’s the trade-off:

• If you need the income, early benefits can provide relief.
• If you’re in good health and can afford to wait, delaying could pay off, especially for married couples where the higher earner’s benefit becomes the survivor benefit.

Every situation is different, and a break-even analysis can help weigh your options.

Don’t Forget the Tax Bite

Many people are surprised to learn that Social Security can be taxable, up to 85% of your benefit, depending on your income. That means tax-smart withdrawals from your other accounts (like IRAs or Roths) can help you stay in a lower bracket and reduce the tax on your benefit.

And yes, future legislation could change the taxation of benefits, too.

What Should You Do Now?

Regardless of your age or retirement status, here are a few smart steps to take:

• Treat Social Security as a supplement, not your foundation. You’ll likely need multiple income streams in retirement, and Social Security should be just one.
• Maximize tax-advantaged savings. Use IRAs, 401(k)s, and HSAs to build your own retirement security.
• Plan conservatively. If you’re younger, consider running projections with a reduced Social Security benefit, or none at all, to see if your plan still holds up.
• Stay informed. Social Security reform may not be imminent, but it is inevitable. Keep an eye on policy changes, and adjust as needed.

The Bottom Line

Social Security will continue to be part of your retirement, but it’s unlikely to carry the same weight it once did. No need to panic. Just a reminder to plan ahead.

Let’s make sure your retirement income doesn’t depend on what Congress does (or doesn’t) do.

Need help running the numbers?

Our Free Retirement Evaluation can help you understand where Social Security fits in your overall plan, and how to build around it with confidence.

Have any questions, comments, or feedback? Just hit reply! We personally go through and answer each message.
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Thanks for reading!
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​Keeping wealth in focus,

The MY Wealth Management Team