The Social Security Administration publishes an annual report (SSA.gov) on the status of the trust funds used to pay benefits. The latest report, released last week, highlights a growing deficit and a concerning long-term outlook. In 2025, total benefit payouts exceeded income from payroll taxes and interest by $200 billion, reducing the trust fund balance to $2.338 trillion. Based on current projections, this shortfall is expected to persist, leading to the depletion of reserves by 2032.
So what happens after 2032? Even if the trust fund is depleted, Social Security will not disappear. The program is still expected to pay about 78% of scheduled benefits, gradually declining to around 65% by 2100. While this raises valid concerns, a complete loss of benefits is not expected. Even in a worst-case scenario with no policy changes, benefits would likely be reduced by roughly 22%, not eliminated.
While the exact outcome is uncertain, changes will likely be made before 2032. Historically, adjustments have come through increased revenue (taxes) or changes to retirement age rather than outright benefit cuts, and several proposals are already being discussed. CNBC As the Trustees noted in their report, taking action sooner would allow changes to be phased in gradually and give workers time to adjust.
Social Security Claiming Strategies for Individuals
Concerns about Social Security’s long-term outlook have led more individuals to consider claiming benefits early. However, doing so can significantly impact a long-term financial plan.
For those born in 1960 or later, full retirement age is 67. Claiming earlier results in a permanent reduction, averaging about 6% per year. Starting at age 62 reduces benefits by roughly 30%. Conversely, delaying benefits increases them by about 8% per year up to age 70, resulting in a maximum increase of 24%.
A common question is how long it takes to “break even” when delaying benefits. The breakeven point between claiming at 62 versus 67 is typically around age 78–79. Between 67 and 70, it’s around age 82–83. In general, if you expect to live well into your 80s, delaying benefits is often advantageous.
Claiming Strategies for Married Couples
For married couples, Social Security decisions should be coordinated, as there are two additional considerations: spousal and survivor benefits. I believe this is one of the most overlooked parts of the Social Security claiming equation.
Spousal benefits allow a lower-earning spouse to receive up to 50% of the higher-earning spouse’s full retirement age benefit. For example, if one spouse is eligible for $3,500 per month at age 67 and the other for $1,000, the lower-earning spouse could receive up to $1,750. However, claiming early reduces these amounts, meaning one spouse’s decision can affect both benefits.
Survivor benefits are often the most important consideration for couples. When one spouse passes away, the surviving spouse steps up to the higher of the two benefits, while the smaller benefit disappears. For the higher-earner, delaying benefits increases not only their own income but also the guaranteed lifetime income for the surviving spouse, while claiming early can reduce the benefit that carries over.
For this reason, a common strategy is for the lower-earning spouse to claim at full retirement age and the higher-earning spouse to delay until age 70. This approach helps maximize total lifetime benefits and provides the highest possible survivor benefit.
Every situation is different, and factors such as life expectancy and other assets play a key role. However, when delaying benefits is feasible, it can be a powerful tool for managing longevity risk in a financial plan.
Financial Planning Corner:
530A Trump Accounts Rollout
Beginning in July, a new federally sponsored savings account will be available to help families build long-term financial security for children.
These accounts are available to any child who is under 18 at the end of the year in which the account is opened and who has a valid U.S. Social Security number. Accounts can be set up at Trumpaccounts.gov.
Children born between 2025-2028 will receive a one-time $1,000 government “seed” contribution. Families may also contribute up to $5,000 per child per year, with no income limits or earned income requirements. Contributions are made with after-tax dollars and are not tax-deductible.
Funds are generally restricted until age 18, with limited exceptions. After age 18, the account follows Traditional IRA distribution rules. Investment earnings grow tax-deferred and are generally taxed as ordinary income when withdrawn, while contributions are generally not taxed again upon distribution. Early withdrawals prior to age 59½ may be subject to a 10% penalty unless an exception applies (such as education expenses, a first-time home purchase, or qualifying medical costs).
These accounts are designed primarily as long-term retirement savings vehicles. For families prioritizing education funding, a 529 plan may still be the more appropriate option depending on goals.
Quick Hits:
- Bagpipes in the streets of Boston, celebratory goats, Europeans experiencing US mega-gas stations, and a jersey wearing duck. Here are some fun, off-pitch stories from the World Cup Fox Sports
- Inside the Louisiana zoo where you can get bitten, swim with otters, and where multiple animals have mysteriously “misplaced” themselves WSJ
- Live Free and Gamble: New Hampshire leans into “charitable gaming” as casinos and betting expand across the state Boston.com
- Ranked: The Cost of Nursing Homes in Every US State Visual Capitalist
Long-Term Money
One of my favorite financial writers, Morgan Housel, recently published an article (Collab Fund) weighing in on the familiar generational critique that younger generations have it easier and are therefore more spoiled or less resilient. In many ways, that observation isn't wrong. Modern life is materially more comfortable, safer, and more convenient than what previous generations experienced.
Housel doesn't disagree with that point, but argues these outcomes were the goal all along. What looks like ease is largely the result of long-term sacrifice, innovation, and compounding progress. Earlier generations worked and endured precisely so the next ones could live with fewer hardships and greater opportunities. Abundance in areas like food, healthcare, and education is not accidental; it's the product of generations of effort and investment.
As still a relatively new parent, I've found myself thinking more and more about a challenge many of our clients and readers have faced before me: Where is the line between providing opportunities and support versus "spoiling" our children? While there may never be a definitive answer, I appreciated Housel's perspective: "When one generation's life becomes comparatively easier than before, their life does not become objectively easy; they just move on to worrying about higher-order problems that were previously deemed not urgent enough to worry about."
Quote: “Just taught my kids about taxes by eating 38% of their ice cream." — Conan O'Brien
Happy Father’s Day to all the fathers out there!
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