If recent headlines about Social Security have you feeling uneasy, you’re not alone. It’s a hot topic, sparking concern and prompting many of our clients to question their retirement income – and whether they’re making the right decision about when to claim. While it’s natural to feel anxious, it’s important to approach these concerns with a clear head and a proactive plan.

Taking a conservative and well-informed approach has always been a cornerstone of sound retirement planning. Let’s explore the realities of the current Social Security situation and consider how you can plan with confidence.

Understanding the Headlines 

You’ve likely encountered news highlighting that Social Security funds are projected to be depleted by 2035. While this sounds alarming, let’s look at the full picture. Even if the projections hold true, ongoing tax revenues are expected to cover approximately 83% of scheduled benefits. This means Social Security isn’t going to disappear entirely, but future retirees could see a reduction in their monthly payments if Congress doesn’t take action.

Interestingly, the concept of planning for a potentially lower Social Security benefit isn’t new. I’ve consistently incorporated conservative estimates into retirement projections since the beginning of my career. We typically use Social Security benefit assumptions at 75% of the stated amount, especially for our younger clients. This isn’t a knee-jerk reaction to recent headlines; it’s a foundational element of building a resilient retirement strategy.

Potential Changes & Claiming Decisions

Some of the changes that have been discussed include the possibility of decreased future benefits, a flat benefit system and an increase in the eligibility age for receiving full retirement benefits. It’s important to remember that these are potential adjustments; the specifics and timing remain uncertain.

Now let’s look at how these potential changes are influencing how our clients and our team approach their claiming strategies. Traditionally, advice for those in good health and with sufficient other assets leaned toward delaying Social Security benefits until age 70 to maximize their monthly income. This delay currently results in an approximately 8% annual increase in benefits beyond the full retirement age. The break-even point for this strategy, where the total benefits received by delaying outweigh those received by claiming earlier, often falls in the mid-80s.

However, the evolving landscape of Social Security and the risk of policy change is prompting us to consider claiming benefits at their normal retirement age, or even earlier in some cases. Here are three general scenarios:

• Nearing Retirement: Imagine someone approaching their normal retirement age. In the past, they might have delayed benefits. Now, with concerns about potential future benefit reductions, they might be weighing the security of receiving benefits now versus the potential for a larger payout later that might be subject to change.
• Facing Medical Conditions: For someone with health concerns, the calculus might have favored claiming earlier. The current uncertainty around Social Security reinforces this consideration, as the focus shifts toward maximizing benefits received during their lifetime.
• Approaching Early Retirement: An individual who has the financial flexibility to retire early might have delayed Social Security as a way to further bolster their future income. Now, they might weigh the benefits of accessing those funds earlier against the backdrop of potential systemic changes.

These general scenarios illustrate that the decision of when to claim Social Security is becoming increasingly nuanced. The “right” claiming age is a personal decision based on a variety of factors, including your health, financial situation, and outlook on the future of Social Security.

Every Social Security claiming strategy involves some level of risk—because these decisions rely on unpredictable factors like lifespan, future health care needs, market performance, and policy changes. While different strategies manage these risks in various ways, none can eliminate them entirely.

Finding Peace of Mind in Retirement Planning

The ongoing discussions and potential changes surrounding Social Security can undoubtedly create anxiety. It’s important to remember that proactive and conservative planning is your strongest ally in navigating this uncertainty.

A well-thought-out retirement plan that considers a range of possibilities, including a potentially less robust Social Security system, will provide you with greater peace of mind. Focus on the elements you can control: your savings, investment strategy, and overall financial plan. By doing so, you can approach the future with confidence, no matter what adjustments Social Security may undergo.

Timing your Social Security is less about certainty and more about strategy – because without a crystal ball, all you can do is plan smart!

This material is distributed for informational purposes only. Investment Advisory services offered through Journey Strategic Wealth, a registered investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). The views expressed are for informational purposes only and do not take into account any individual’s personal, financial, or tax considerations. Opinions expressed are subject to change without notice and are not intended as investment advice. Past performance is no guarantee of future results. Please see Journey Strategic Wealth’s Form ADV Part 2A and Form CRS for additional information.