Is Social Security Running Out? What It Could Mean for Your Retirement

We have had a handful of clients recently who have asked whether they should start collecting Social Security early because they’re worried the money won’t be there in a few years. It’s a fair question. After all, when you’ve spent your entire career paying into a system, you expect it to be there when you need it.

You’ve probably seen some of the same headlines about Social Security running out of money. There are some legitimate concerns about how the program will be funded in the years ahead, and changes will likely need to be made. So, what’s actually happening, and should it affect how you plan for retirement?

What’s Going On With Social Security?

Social Security is primarily funded through payroll taxes paid by workers and their employers. For many years, the program collected more money than it paid out, allowing it to build up reserves for the future.

The problem is that Americans are living longer, more baby boomers are retiring, and there are fewer workers paying into the system compared to the number of people collecting benefits. As a result, Social Security is now paying out more than it collects and using its reserves to cover the difference.

According to the 2026 Social Security Trustees Report, the trust fund that pays retirement and survivor benefits is projected to run out of reserves in 2032. If nothing changes, they estimate incoming payroll taxes would only be enough to cover about 78% of scheduled benefits.

To put that into perspective, someone expecting $3,000 per month in Social Security could potentially see that reduced to around $2,340. That’s nearly $8,000 less per year.

None of these cuts have been approved or scheduled. They’re simply what could happen if Congress doesn’t address the funding problem. There’s still time to make changes, and several possible solutions are being discussed.

Some of those include raising the full retirement age beyond 67, increasing payroll taxes, removing the income cap on wages subject to Social Security taxes, or adjusting how future benefits are calculated. It’s also possible that Congress will use a combination of these approaches.

None of these solutions are particularly popular, which is part of the reason the issue has been difficult to resolve.

Who Could Be Affected?

The short answer is just about everyone, although the impact could look different depending on your age.

For younger workers, changes might mean paying more into Social Security throughout their careers or waiting longer to receive full benefits. Those approaching retirement could face adjustments to the benefits they’ve been expecting, leaving them less time to make up the difference.

But what about people who are already retired and collecting Social Security? There’s a common belief that anyone currently receiving benefits would be protected from future cuts. While Congress may decide to protect existing retirees, there’s no guarantee of that. If the trust fund runs out of reserves without any legislative changes, even people already collecting benefits could see a reduction.

That doesn’t mean you should expect your Social Security check to suddenly decrease. Historically, lawmakers have been reluctant to reduce benefits for current retirees, and there will likely be significant pressure to protect them. Still, it’s something worth considering when looking at your long-term financial picture.

Should You Take Social Security Early?

With all this uncertainty, some people are wondering whether they should start collecting Social Security as soon as possible, at age 62, rather than waiting. Remember, claiming Social Security at 62 permanently reduces your monthly benefit compared to waiting until your full retirement age. Waiting until age 70, on the other hand, can increase your monthly benefit considerably.

Taking Social Security early doesn’t necessarily protect you from future reductions either. If Congress doesn’t address the funding shortfall, benefits could still be reduced regardless of when you started collecting.

There are certainly situations where claiming early makes sense. Your health, life expectancy, other retirement income, and your spouse’s benefits all play a role. But the decision should be based on your personal circumstances rather than fear of what might happen in Washington.

How We’re Planning for the Uncertainty

One thing we regularly remind clients about is that Social Security should be a part of your retirement plan, but it shouldn’t be the only thing you’re relying on.

At Meridian, we take a conservative approach when building financial plans. Rather than assuming you’ll receive every dollar of your projected Social Security benefit, we create our plans to account for potential reductions to see how your retirement would be affected.

For example, we might look at what your retirement plan would look like if Social Security benefits were reduced by 20% to 25%. Would you still have enough income to cover your expenses? Would you need to adjust your retirement date or spending? Could your investments and other income sources make up the difference? These are much easier questions to address before retirement than after you’ve already stopped working.

It’s also important to remember that Social Security is just one of several things that can change throughout retirement. Inflation, healthcare expenses, taxes, and market performance can all affect how far your money goes. That’s why we regularly review financial plans and make adjustments as circumstances change.

Planning for What We Can Control

I don’t believe Social Security is going away, and I do expect lawmakers will eventually make changes to help keep the program funded. What those changes will look like, and who will be most affected, is still uncertain.

The important thing is not to let the headlines drive your decisions. If you’re approaching retirement, don’t rush to claim Social Security just because you’re worried about potential cuts. And if you’re already retired, there’s no reason to panic.

I’ve found that most people aren’t necessarily looking for a perfect retirement plan. They just want to know they’re going to be okay. And while we can’t predict what Congress will do with Social Security, we can put together a plan that accounts for some of those unknowns. That’s really what good financial planning is about.