How To Plan For Retirement When Social Security is Uncertain #152

 Social Security faces big challenges, with projections showing benefits may be cut by 23% as early as 2033. In this episode, Josh Nelson, CFP®, breaks down what “insolvency” really means, explores possible reforms, and shares strategies to build a retirement income plan that doesn’t depend on Congress. If you’re nearing retirement—or just want peace of mind about your future—you won’t want to miss this conversation. 

Instagram: https://www.instagram.com/keystonefin/
Twitter: https://twitter.com/Keystone_Fin?advisorid=33004651
Contact Josh Nelson: https://www.keystonefinancial.com
Contact Jeremy Busch: https//www.keystonefinancial.com
Podcast Editing: Tim Leaman/info.primegen@gmail.com

Transcript

Wiser Financial Advisor – Planning for Retirement with an Eye to Social Security
Hi everyone, and welcome to The Wiser Financial Advisor Show with Josh Nelson, where we get real, honest, and clear about the financial world and your money. I’m Josh Nelson, Certified Financial Planner and founder and CEO of Keystone Financial Services. Let the financial fun begin!

Today, we’re talking about Social Security and retirement income planning. You’ve probably seen headlines warning that Social Security will be insolvent in about eight years. This isn’t a new issue—we’ve known for decades that eventually the program would face funding challenges. But now, that day is approaching quickly.

If you haven’t already, I encourage you to log in to ssa.gov to review your statement. It shows your full payroll history, and your benefit is based on your top 35 earning years. What’s important to note is that, for years, Social Security has clearly stated that it won’t be able to pay full benefits at some point. Right now, that date is projected to be 2033.

So what does “insolvent” mean? It doesn’t mean Social Security will stop paying benefits. Instead, if Congress makes no changes, retirees would still receive about 77% of scheduled benefits. In other words, a 23% cut across the board. That’s still serious, but it’s not the same as the program going broke.

Currently, the average Social Security retirement benefit is about $1,907 per month, or roughly $3,800 for a married couple. At the high end, someone who paid the maximum into the system for 35 years could receive $3,822 per month at full retirement age, or $4,873 if they waited until age 70. But remember, those amounts could be reduced by 23% in less than a decade.

Why is this happening? Simply put, there aren’t enough workers paying into the system compared to the number of retirees. In 1960, there were 5.1 workers for every retiree. By 2024, that dropped to 2.7. By 2035, it’s expected to fall to just 2.3 workers per retiree. That math just doesn’t work without some type of reform.

So, what could change? Potential solutions include:

• Raising the full retirement age, since people are living longer.
• Eliminating the payroll tax cap, which currently stops at $168,600 of earnings.
• Means-testing benefits, reducing or eliminating them for higher earners.
• Adjusting cost-of-living increases.

In reality, it will probably be some combination of these. But the most likely outcome is that higher earners will see reductions or even lose benefits entirely.

That’s why I encourage people not to rely solely on Social Security. You don’t control it—Congress does. And with longer lifespans and inflation, you’ll need additional savings and investments to support your lifestyle. Decades ago, people talked about a “three-legged stool” of retirement income: Social Security, personal savings, and a pension. But pensions are rare today. For most people, the stool really has two legs—and one of them is wobbly. That’s why saving and investing is so critical.

At Keystone, we run detailed financial plans with clients to help prepare for different scenarios, including Social Security cuts. Sometimes we’ll even model retirement assuming no Social Security benefits at all, so that anything received is just “gravy.” Personally, that’s how my wife Sarah and I plan—if benefits are there, great, but we don’t want to depend on them.

Good planning also includes strategies like Roth conversions, which can provide tax-free income later. With the national debt at $38 trillion and climbing, it’s hard to imagine tax rates staying this low forever. Doing conversions now can help lock in today’s historically low rates.

We also talk with clients about having emergency funds, Medicare and health insurance planning, long-term care, and tax-efficient giving. Retirement income planning isn’t just about making sure the basics—housing, food, healthcare—are covered. It’s also about funding the fun stuff: travel, experiences, generosity, and leaving a legacy.

If you take anything away from this episode, it’s this: Social Security isn’t dead, but it’s not something to rely on completely. Plan as if benefits will be reduced, and build a strong financial foundation you can control. That way, your retirement won’t depend on what Congress does or doesn’t do.

If you’d like to dive deeper into this topic, or you know someone who’s concerned, visit us at keystonefinancial.com. You can schedule a conversation right from the homepage. We’re happy to answer questions and provide analysis, even if you’re not a client.

Planning is powerful because it puts you back in the driver’s seat. We can’t control everything, but we can make thoughtful decisions today to prepare for tomorrow.

I hope you found this helpful. Please share this episode with friends or family who may need to hear it, and leave us a rating on your favorite podcast app. Until next time, take care, and God bless.