#97 - What Is the Future of Social Security?

Eric Blake: When people ask me, is Social Security going to be there when I retire? The answer is yes. Worst case, it is going to be 20% less than what you thought it was going to be, but it is going to be there.

Welcome to another episode of the Simply Retirement Podcast, where we want to educate and empower women to live your retirement on your terms. I am your host, Eric Blake, practicing retirement planner for over 25 years, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life.

Joining me again today is Wendy McConnell. Wendy, how are you?

Wendy McConnell: I am good. How are you?

Eric Blake: I am doing very well, doing very well, and I am really interested in your feedback on this topic once again. It is actually, as we have done different episodes on Social Security, it is a question you have brought up a couple of times as we were talking about this.

So today’s conversation is going to be focused on the future of Social Security.

Wendy McConnell: Okay.

Eric Blake: So is it going to be there or not? That is the big question, right?

Wendy McConnell: That is always my concern.

Eric Blake: But we are going to talk about the current status of the trust fund, what the latest trustees report actually says, what are some of the potential reform options that could be out there, possible timing of congressional action, and most importantly, what it means for our audience.

And as we are recording this episode, I am actually preparing to host a webinar later today. It is actually about an hour from now, called What’s New with Social Security in 2026. Almost every time I speak on this topic, whether it is a webinar, a client meeting, or the podcast, the same question comes up. What is going to happen with Social Security?

That is really what inspired today’s episode. Of course, it will likely not be the last time we talk about this topic, because the numbers update every year. But since I have been reviewing this information in preparation for the webinar, I thought it was a good time to address it.

And again, since this episode will actually be released a few weeks from now, after the webinar takes place, we will be sure to share a link to that recording in the show notes if anybody would be interested in checking that out.

Wendy McConnell: Okay. Busy day for you, huh?

Eric Blake: Busy day today, absolutely. Hopefully, by the end of the episode, what I am hoping is that we can provide a clear understanding of what is actually happening, a realistic view of what some of the potential changes are, and practical planning steps that you can take.

We are going to be sharing a link to the webinar. We will share a link to the trustees report, all that fun stuff, on simplyretirementpodcast.com.

Wendy McConnell: Alright.

Eric Blake: Alright, so let’s talk about what the trustees report actually says. This is a report that is released every June and is basically about the health of the Social Security system.

The June 2025 report was the most recent, but it reflects the numbers from 2024, just to set some time perspective. Here is basically what it showed. It showed the combined trust fund had about $2.788 trillion at the end of 2023. By the end of 2024, it had declined to $2.721 trillion.

Total income in 2024 was approximately $1.418 trillion. Total expenditures, the money leaving the fund, were $1.485 trillion, which results in a net decrease of about $67 billion.

So in simple terms, the system is paying out more than it is bringing in.

Wendy McConnell: Still.

Eric Blake: Still, yes, and that is the issue. That is not going to change anytime soon. If no changes are made, the combined trust fund is projected to be depleted in 2034.

Wendy McConnell: Okay.

Eric Blake: Now here is the key point. If this happens, benefits are not going to go to zero. With ongoing payroll taxes coming into the system and what is being paid out, it would still fund about 81% of scheduled benefits.

That simply means it is a reduction, not an elimination.

Wendy McConnell: Okay.

Eric Blake: I am going to include the full trustees report in the show notes. However, unlike a self-proclaimed Social Security nerd like me, I do not expect you to read the whole thing. It is a very thorough document.

But I do want to stress that for women who are in or near retirement, Social Security is one of those foundational pieces of the retirement puzzle. Understanding the numbers, not memorizing them, but having clarity around what is actually happening, is important.

If you are in or near retirement, history suggests your benefits are much less likely to be impacted, assuming Congress actually does something in time. Your children and grandchildren may not be so lucky, but that distinction really does matter.

I also want to share what might actually fix the problem as we get closer to the 2034 deadline.

Wendy McConnell: Okay, but what I picked up from what you said is that there might be a 19% reduction, because you said 81%. Is that what you meant?

Eric Blake: Absolutely. The way to interpret that is the system is not going to go to zero.

Wendy McConnell: Right.

Eric Blake: By the time we get to 2034, if nothing has been done to fix the problem, they would cut benefits by a projected 19%, rounded to 20%. That solves the problem.

Wendy McConnell: Okay.

Eric Blake: Nobody wants that, but people often worry that Social Security will go away entirely. The answer is no. For planning purposes, you might assume a 20% reduction from what your current estimate says.

Does that make more sense?

Wendy McConnell: Yes, for sure.

Eric Blake: So what could restore solvency? There are four key areas to think about.

The first is increasing the maximum earnings subject to Social Security tax. In 2026, that cap is $184,500. Income above that is not taxed for Social Security purposes.

One option is to raise that cap. Another is to eliminate it altogether.

Wendy McConnell: May I chime in for a second?

Eric Blake: Absolutely.

Wendy McConnell: The reason for that cutoff was the assumption that higher earners would not rely on Social Security as much.

Eric Blake: It is about leveling the system. Social Security replaces a higher percentage of income for lower earners. There is a cap on benefits, so higher earners are not basing benefits on their full income.

Wendy McConnell: So they are trying to make it fair by saying you will not get more than this, so you do not have to pay after a certain point.

Eric Blake: Right.

Wendy McConnell: Even though they probably could afford it.

Eric Blake: That is a different conversation. But compare that to Medicare tax, which has no cap. Social Security is different.

So raising or removing the cap increases revenue without directly reducing benefits and primarily impacts higher earners.

The second option is raising the full retirement age. Currently, it is 67 for those born in 1960 or later. In 1983, it was raised from 65 to 67 gradually.

If raised again, it would likely be phased in slowly and affect younger workers more than those near retirement.

Historically, those near retirement have been protected.

Next is adjusting the benefit growth formula. That includes cost of living adjustments and wage indexing.

During working years, earnings are indexed to wage growth. Once receiving benefits, you get annual cost of living adjustments.

Some proposals suggest tying future growth more closely to inflation rather than wages, which would slow growth and impact younger workers more.

Wendy McConnell: Okay.

Eric Blake: Another option is modifying how cost of living adjustments are calculated.

This might get less pushback than it should, because people think as long as their benefit does not go down, smaller increases are acceptable. But over time, those smaller increases compound and reduce purchasing power.

For many women who may live into their eighties or nineties, purchasing power matters. Retirement planning must consider decades, not just a single year.

Then there is the concept of grandfathering. In 1983, when retirement age was increased, those already receiving benefits or close to retirement were largely protected.

Changes were phased in for younger workers. That historical pattern suggests those near retirement today are less likely to be impacted.

Wendy McConnell: Based on the past.

Eric Blake: Based on the past.

Historically, reform happens when urgency increases. The projected depletion year is 2034, but since benefits are not in danger today, there is less pressure for immediate action.

The last time this happened, action was taken within months of depletion.

Wendy McConnell: It was months?

Eric Blake: Yes, months.

Wendy McConnell: That is disturbing.

Eric Blake: It is. Hopefully, something will get done, but we do not know what yet.

Some people take a conservative approach and plan for a 20% reduction. Nobody wants that, but it depends on how confident you want to be in your plan.

If you are close to retirement, you should feel relatively confident benefits will not be heavily impacted. But younger workers might choose to not rely on Social Security at all and treat it as icing on the cake.

Wendy McConnell: Mm-hmm.

Eric Blake: It comes down to planning thoughtfully, not emotionally.

So what should you do now? If you are near retirement, do not make reactive claiming decisions. Do not start benefits early just out of fear.

Instead, review your benefit estimates, verify your earnings record, coordinate Social Security with tax strategies, and fit it into your overall income plan.

Wendy McConnell: And if you are married, should one wait or both claim early? Those are decisions to make.

Eric Blake: Exactly. Those strategies do not change. The question becomes what benefit assumption you use.

A conservative approach would be planning for a 20% reduction.

If you are near retirement, a dramatic reduction is unlikely. But if Social Security is your primary income source, you may feel more stress about its future.

For younger workers, it makes sense to build a margin of safety into your plan. Stress test it with a 20% reduction. If it never happens, you are ahead. If it does, you are prepared.

Wendy McConnell: Very true.

Eric Blake: For younger generations, something will change. We just do not know what.

A reasonable assumption might be benefits starting at age 70 or at a reduced level, or building a plan that does not rely heavily on Social Security.

If you do that, you may need to save more, spend less, work longer, or adjust your investment strategy. Retirement planning is about deciding which levers to pull.

Small, intentional adjustments can build flexibility and confidence.

Wendy McConnell: Got it.

Eric Blake: To recap, the trustees report is released each June. The most recent report projects depletion by 2034, but ongoing taxes would still fund about 81% of benefits.

Wendy McConnell: For how long?

Eric Blake: That would be the solution itself. Cutting benefits by about 20% would solve the problem.

Wendy McConnell: I got you.

Eric Blake: It creates other problems, but it solves that one.

That is why I say Social Security will be there. Worst case, it is about 20% less.

If you are conservative, build that into your plan. If you want the same lifestyle, you may need to save more or work longer.

Make decisions based on education, not emotion.

Wendy McConnell: Okay.

Eric Blake: Historically, changes have been gradual and have protected those near retirement.

If you are in or near retirement, focus on coordinating Social Security with your income and tax strategy, not reacting to headlines.

If you prefer a conservative approach, stress test your plan with a 20% reduction or assume benefits start at 70. That may require adjusting savings, spending, or retirement timing.

The key is not basing your plan on what Congress will do, but building flexibility.

Wendy McConnell: Well, the last plan did not work out very well, because here we are 40 years later with the same problem again.

Eric Blake: That is true. We have politicians making decisions, and everyone has different views.

A big factor is demographics. Many baby boomers are now receiving benefits, and there are fewer workers paying into the system.

Wendy McConnell: Okay.

Eric Blake: Because we rely on Congress, they will likely wait until action is absolutely necessary.

Wendy McConnell: Who is talking about these solutions? Are we even trying, or are we waiting until the last minute?

Eric Blake: They will likely wait until the last minute.

These ideas are being discussed, but each option has tradeoffs. Raising taxes or retirement age is not popular.

Wendy McConnell: No.

Eric Blake: That is why it will likely be a last-minute decision with compromises.

Wendy McConnell: I have a solution.

Eric Blake: What is your solution?

Wendy McConnell: Get all the retiring politicians together and have them decide, since they will not be worried about being reelected.

Eric Blake: It is a tricky situation. The best thing we can do is stay as optimistic as possible and build a plan based on what we can control.

Do not sit around and stress about it. Build your plan around what you have influence over.

Wendy McConnell: Okay.

Eric Blake: As always, thank you for tuning in, and thank you to Wendy for being here with me once again.

If you would like help stress testing your retirement plan, whether that means evaluating a 20% reduction assumption, modeling a delayed start at age 70, or understanding how Social Security fits into your broader income strategy, you can visit getmysimplyretirementroadmap.com to schedule a conversation with our team.

Retirement planning is not about guessing what Congress will do. It is about building a plan that can work either way and building flexibility into your future.

That is it for today’s episode. For all the links and resources mentioned, including the webinar recording and the trustees report, visit simplyretirementpodcast.com.

Do not forget to like, follow, and share our show. Until next time, remember, retirement is not the end of the road. It is the start of a new journey.