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.
Here is how I explain it: “Julie, you’re worried about the possibility of a 22% cut. But under today’s rules, start your retirement benefit at 62 instead of 67 and you have a 100% chance of a 30% cut to your monthly benefit.”
That 30% is not my forecast. It is SSA’s claiming formula. Congress doesn’t even have to hold a vote. You can arrange this particular cut in your pajamas.
You are trying to avoid a possible cut by signing up for a certain one. Before we call that playing it safe, let’s count what you’re buying and what you’re giving up.
Claiming at 62 buys five more years of checks than waiting until 67. The price is a monthly benefit that starts 30% smaller. I count those earlier checks, along with the savings spent while waiting. We are comparing retirement income over a lifetime, not just two percentages. The choice has to earn its place in the retirement plan.
And here is the part the “get it while you can” argument misses: There is no protection from future cuts attached to an early filing date. Under an across-the-board percentage cut, the early claimant takes another reduction from an already smaller check. The person who waited takes the reduction from a larger one. You collected sooner. You did not make yourself immune.
Waiting is not doing nothing. Under today’s rules, someone Jeff and Julie’s age receives 70% of their full-retirement-age benefit by starting at 62, compared with 124% at 70. That is more monthly income for the later years of retirement. I want clients to understand what they are surrendering before they surrender it.
Jeff asked, “What do you think Congress will do?”
I let Jeff know that Congress has addressed financing problems before. In 1983, it increased revenue and changed benefit rules, including taxing some benefits and gradually raising full retirement age. That history belongs in the conversation. Predicting the next deal does not belong at the center of their retirement plan.
With Jeff and Julie, I have compared claiming at 62, full retirement age and 70. I have calculated lifetime income using their longevity estimates, modeled survivor benefits and shown them how Social Security interacts with their other retirement assets. That is what they hired me to do. They didn’t bring me on to nod sympathetically at the same headlines they have already read.
Here is what I recommend: Put your fear into the calculation. Test the claiming strategies with smaller future benefits. Count the earlier checks, the withdrawals from savings and the income left to the surviving spouse. When the numbers say wait, I tell them to wait. Fear does not get a veto over the result. Don’t throw away the stronger strategy because collecting now feels better this morning.
Social Security has a financing problem. Among the clients sitting across from me, it has become a trust problem, too. I take both seriously. But I am not asking them to trust Congress. I am telling them not to mistake an early check for protection from Congress.
Julie deserves an answer, not an echo of her anxiety. Mine is this: Claim because it strengthens your retirement, not because the news frightened you. Don’t let fear file your application.
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