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If Social Security Payments Pay Only 77% in 2034 – What Will You Do?

Category: Financial and taxes in retirement

September 14, 2018 — Thanks to one of our regular idea contributors, Jeff H, we have a not so hypothetical problem for you. If, as the Social Security Trustees warn, the retirement portion of Social Security exhausts its reserves in 2034 and is only able to fund 77% of promised benefits starting in that year, what will you do? A similar question could apply to Medicare, which is expected to run out of money even earlier, in just 8 years (2026). Medicare’s case is harder to prepare for: if nothing is done, presumably benefits will be cut or reimbursements to doctors and hospitals reduced, driving even more health care providers out of Medicare.(Note: in our recent newsletter the headline said ‘cut 77%), which was an inadvertent error. The accurate statement is that benefits would be paid at 77%.)

In spite of a steady stream of warnings from Trustees and other experts, legislators have done nothing to address the coming problem. With soaring deficit projections expected in the next few years as a result of the 2018 tax cuts, the problem (and any solutions) is only likely to get worse. There won’t be any money to spare: the nonpartisan Congressional Budget Office estimates the deficit will hit a record $1 trillion in 2020; total U.S. debt will reach $33 trillion by 2028.

As Jeff points out, “Some might argue the cuts will never happen. Nonetheless, it might be interesting to ask this question: So if it became inevitable that no consensus on these two programs could be reached… what actions are you taking now or would you undertake to survive?”  He does not pose the question seeking political rants or a discussion of possible solutions, but would simply like know what ideas people might have on how to survive. As he says: “You know the Scout motto: Be Prepared. We are perilously close to D-Day for many people.” Later on in this article we will have some suggestions on possible avenues to take. But first, to help you understand the problem better, we’ll provide some information on what the Trustees are saying.

What the Social Security Trustees Say
In their latest annual report the Trustees were pretty clear about what has to be done to fix the SS part of the problem. Unfortunately they have been issuing the same warnings every year, yet nothing much gets done. The only improvements that have been made were some adjustments in 2015 including “deemed filing”, which plugged some minor holes that people born before 1954 could take advantage of. Unfortunately, these did not significantly address the larger problem.

Here is what the Trustees said in their most recent report: “The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits and could preserve more trust fund reserves to help finance future benefits. Social Security will play a critical role in the lives of 62 million beneficiaries and 173 million covered workers and their families in 2017. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generation.”

The 2034 shortfall – take the money and run?
The looming funding shortfall adds a new dimension to the claiming question that we often discuss in Social Security articles: Claim as soon as you can (at age 62), wait until Full Retirement Age (66-67), or hold out until age 70 and get the maximum benefit. For more on that see “Rethinking the ‘When to Take Social Security Question’?”. The potential 2034 cuts change the claiming question, because if you are only going to get 77% of promised benefits in 2034, maybe taking the money and running is the better idea.

Doing some math
Let’s look at a specific example to see how this might work out in real life. For example, let’s say you turn 62 this year and your Full Retirement Age (FRA) is 66 and 4 months. According to an example provided by the SS Administration, the payment for this hypothetical person at age 62 would be $953, and at their FRA (66 and 4 mo’s.) the benefit would be $1300. If they wait until age 70 to claim, it would increase to $1,681. In 2034, 16 years from now, the person in our example will be 78 years old. Using current mortality projections for someone alive at age 62 (19.4 years for a male and 22.3 for a female), the odds are that the person in our example will experience between 3 and 6 years of reduced benefits. A person who turns 62 in 2034 (they are currently 46) would never get their full benefit.

FYI, this chart shows what happens to this hypothetical person if benefits are trimmed to 77% starting in 2034. If you delay the age when you start claiming you still get a bigger benefit (if you or your spouse are still alive), but the bigger the benefit the larger the $ cut. Your earnings record might be lower or higher than the example used here.

Age Start Collecting

100% benefit


77% Ben. Start 2034


$ Difference Paid


So what will you do?
By now you probably see that the issues are complicated. And we have arrived at the crucial point of this article, your answers to Jeff’s question on how to prepare for bad news in 2034. Here it is again: “What actions are you taking now or would you undertake to survive the potential 2034 cuts to Social Security retirement benefits”?

These are some of your options, undoubtedly you will come up with some more:

– Do nothing and hope for the best
– Work longer and save more
– Claim earlier and get more years in before the cut
– Delay claiming and figure either Congress will fix the problem or you won’t live long enough for it to affect you many years
– Move to a Caribbean country
– ??

Please share your personal solution(s) in the Comments section below. Try focus on what YOU are going to do. Political statements will take us in a direction that probably won’t be helpful.

For further reading:
Take our Social Security IQ Quiz
Will Millennials Get to Collect Social Security (Fedsmith)

Posted by Admin on September 14th, 2018


  1. I took the math in your example all the way to the end. Using your figures above, an average life span woman who retires in 2018 would receive the following benefits:
    8 years at $953 per month (ages 62 to 70), total $91488
    8 years at $953 per month (ages 70 to 78 bringing the person to 2034) total $91488
    6 years at 734 per month (ages 78 -84) total $52,848
    Total collected over 22 years: $235,824

    That same woman who delays her benefits to age 70:
    8 years at $0 per month (ages 62 to 70), total $0
    8 years at $1681 per month (ages 70 to 78 bringing her to 2034) total $161,73
    6 years at $1294 per month (ages 78 – death at 84) total $93168.
    Total collected over 22 years: $254,544

    Unless my math is off, a woman living to an average lifespan would collect $19K more by delaying her benefits to age 70, even presuming a 77% cut in benefits in 2034. (I did the math for a man who has an average lifespan, he would break even almost exactly if he died “on time” and start to beat the odds if he lived longer.)

    Both my husband and I come from very long lived parents (all four of our parents lived into their 90s; we each still have one living parent), so we’re figuring that at least one of us will survive past the US statistical life span. We started collecting the lower earner SS at age 65, the other spouse will claim spousal benefits from 66-70 (we were born before 1954), then switch to the earned benefit at age 70. For the record, even without the spousal benefit loophole, we would have delayed benefits on our higher earner’s SS benefits so that whoever lived longer would continue to receive those higher benefits until death.

    I’d guess there will be some combination of changes in 2034 or sooner, including higher SS tax rates for everyone, raising the wage ceiling on SS payments, and possibly some means testing.

    by JCarol — September 14, 2018

  2. JCarol….Lengthy response analysis for someone not currently receiving (and living off of) these benefits. And the same ideas being floated.

    There are untold millions already receiving benefits of some amount and level like you and us. And many depend heavily on these funds to get by. The intent of the question was largely to see how (and if) folks who could see their amounts cut if intelligent and timely solutions aren’t forthcoming. As we have seen repeatedly, that can keeps politically getting kicked down the road.

    My wife and I are both 68 and have been receiving benefits since our full retirement age of 66. Having done a comprehensive 20 year financial planning and expense budgeting spreadsheet starting at 66, our planning is built around this amount with zero assumptions of COL increases built in. The same 0% flatline was applied to our 401k including the minimum required withdrawals beginning for us in 2020. Bottom line is that we are well aware of the “potential” for these issues to have an effect on our financial decisions. And especially if our health were to take a sudden and expensive turn.

    Publicized scare tactics and jockeying and wordsmithing what these are are not helping anyone. We need timely, smart, and actionable decisions for all concerned. And a lot of folks may need to have their eyes open as, looking backwards in our lives, we know how fast the sand has run out of the hourglass. How dud we get this old this fast? For us, we’ve cut planned spending on travel, etc. and on some level of impulsive and easy spending which are all the temptations of retirement living we worked so hard for and looked forward to. And considered housing changes. But would that be enough? Market fluctuations in our very modest 401k? Would that happen as a side effect to any continuing non-decision? Inheritances for us don’t exist. But we are watching…….and will need to be as vigilant as we can with everything we can and do control.

    by JeffH — September 15, 2018

  3. I feel bad for those who have to depend on government programs for health and retirement services, it seems to me that government programs should only benefit those who need it. Those of us that through our own work and planning do not need SS and/or Medicare should could just leave it on the table. I wonder if that happened (a means test) if the trust funds would become solvent once again.

    by Bob — September 15, 2018

  4. Many years ago my company sent all employees to a seminar entitled “Success through Personal Responsibility”. It was the best program ever and the basic theme was something like “you cant control what anyone else (or any agency for that matter) does; you can only control what you do and how you react to what others do”. So I took the “SS is going to run out of money” seriously when I first heard people talking about the topic years ago and doubled up on savings but cutting back on spending. And glad I did! Not only did we have saving invested but also developed good spending habits! The same for the question about Medicare – since we cant control what happens there the best thing is to get fit and hope for the best. I’m taking the 2034 or sooner date to see a drop in SS seriously and figure by then we’ll be in need of some sort of assistance. Between a cut in SS and the inevitable inflation that will increase costs we are looking for ways to save a little more and also have a slightly more.

    by Jean — September 16, 2018

  5. I agree somewhat with Bob. I am not eligible for SS and I only have Part A of Medicare. My wife will be eligible for SS and will probably also only take Part A. We have sufficient pensions and savings and a retiree health plan so we are fortunate to not need SS and Part B or D. However, I think it would only be right to refund to us in some fashion the amounts we paid into SS and Medicare over the years even if we didn’t receive the regular monthly SS benefit or enroll in Part B. That would save the Government their portion of the SS benefit and Medicare premium which are far larger than the enrollee contributions.

    by LS — September 16, 2018

  6. Jeff, I was merely taking the article’s numbers a little further by multiplying them out to their final conclusions, i.e, how much would one ultimately receive under the various scenarios posed in the article. Although you apparently don’t find that math helpful, some TR readers might. Not all who subscribe to this blog have begun to take their SS benefits.

    To best answer the question: “What actions are you taking now or would you undertake to survive the potential 2034 cuts to Social Security retirement benefits?” it’s useful to have as much information as possible, including new SS break-even points under reduced benefits. (That’s especially true since nobody knows what’s going to happen with SS, not even the governmental agencies responsible for managing it.)

    by JCarol — September 16, 2018

  7. JCarol makes a good point. A strategy of waiting and receiving 8% increases until 70 would soften the deduction if nothing is done. That is my plan at this point.

    by Bruce — September 17, 2018

  8. Bruce your strategy was mine. I wanted to wait until I was 70 to collect my SS benefits, but life happens and my job was eliminated last Nov 30. I will be 64 next week and am a registered nurse with a strong emphasis on Admin and electronic medical records and management. I am working three days a week at a good salary. I could not find a full time job at my age with my good education and skillset. I am grateful for what I have found and it will allow me to adjust and ease into retirement and save some more money. I had to take early SS at 63.5 to make ends meet or I would have depleted some of my savings which I do not want to touch. Some people get sick and or dug ditches all their lives and are just tired and cannot take it one more day. Everyone has a unique situation. Most of us would love to wait until 70 but then tomorrow is not guaranteed either.

    by Jennifer — September 17, 2018

  9. Google Wharton School of Business (The University of Pennsylvania) and Social Security. Wharton is projecting the trust fund (the IOU’s associated with SS tax revenues already spent) will be depleted in 2032 not in 2034 as projected by the trustees. Time to recompute your break even analyses.

    The reality of SS shortfalls will be that people who saved and have additional income will be cut. Others that rely upon SS as their sole source of income will get their payments at 100% in my opinion. That will be the political reality when the SS cuts come down the line. If you have other significant sources of income including RMD’s, take SS as early as possible. Time will tell if I’m correct or wrong, but I suspect cuts will happen if your total income is $80,000 to $100,000, or higher.

    by Doug — September 18, 2018

  10. My plan is to take social security. I waiting until my full retirement age of 66 and continue to work a couple more years. It’s like I gave myself a second salary with which to make home improvements, now and hopefully sock away the rest.

    by Nancy Marks — September 19, 2018

  11. Interesting comments.

    Carol makes an important assumption regarding the advantages of delaying to SS.

    How long do you expect to live???

    For most men it is late 70s. You family health on the men side and your current health should be important factors

    No man in my family ever lived past 80.

    So I’m taken SS ASAP even though I don’t need it, not do I need my IRA

    by Joe p. — September 19, 2018

  12. Just want to add that neither Republicans or Democrats would cut SS, at least not without a sunset rule. Meaning the reduction in benefits would not apply to those already receiving SS, or anyone close to retirement.

    by Joe p — September 19, 2018

  13. I would find a part-time job that pays what I’ve lost in benefits.

    by Jay Smith — September 19, 2018

  14. Exhausted reserves? All FISA taxes right now go into a general fund. SS reserves is just an accounting item – it’s paper sitting in a cabinet and bits on a computer in Virginia. There is no bank or Federal Reserve holding this money for you. The real question is: are you going to vote for representatives who want the retired population to suffer and/or go back to work, or (like the rest of the developed world) are you going to vote for representatives who want to “promote the general welfare” and provide a “safety net” for the entire population?

    by Michael Cox — September 19, 2018

  15. I will finally sit down today and call a financial advisor, although I don’t have much to money to deal with I will feel better talking to someone and figure something out. I never married but never had a great job but do have my health and hope to work part-time in my golden years not only for some income but for the social aspect.

    by Darla — September 19, 2018

  16. What can be done? 1) remove the artificial cap on FICA contributions that penalizes the low wage earners! 2)Cut military spending by at least 30% 3)Review who is receiving social security to make sure it is going to those retired or physically disabled beyond reason. 4)Switch all wage earners on to The FICA retirement system and off of all other forms of retirement pay including policemen, firemen, congressmen, and other government workers.

    by Ron — September 19, 2018

  17. We moved the last few comments that strayed away from the Social Security topic and started a discussion of Roth and IRAs to a different Blog: Is the 4% Spending Rule Still Relevant Today ?

    by Admin — September 19, 2018

  18. Your email blurb headline writer needs to read the article more carefully. It’s not a 77% cut, but instead 77% available (a 23% cut)

    Editors note. Thanks for bringing this to our attention. You are correct, the headline in the newsletter was misleading.

    A reminder about this blog. The focus is on ‘what YOU are going to do. We have other blogs where you can suggest what our elected representatives could do to fix it. Thanks

    by Ron Manuel — September 19, 2018

  19. I will continue to work part-time also. I, too, feel the added income from a part-time job can make up for the loss in benefit, which I really hope won’t happen. A solution can and will be reached.

    Part-time work has allowed me to choose a bit more of what I want to do and I have decided that if I work part-time it has to be interesting and or fun (to me at least). I have to want to go where I work. I am fortunate to have a lovely employer now with good ethics. What I learn here will add to my already diverse skill-set and keep me interacting socially with people which is important to me. I also have been a docent at a historical property near me for ten years and I do enjoy giving tours as it allows me to meet visitors from all over the world. One day for three hours every two weeks I volunteer in a contemplative setting at the same historical property. It has worked for me so far, I will re-evaluate as needed.

    by Jennifer — September 20, 2018

  20. I had planned on waiting until 70 to retire, but they were becoming aware of how many young folks they could hire in place of the long-timers on the job, so I was only able to make it to 68.
    At that time, the government started putting out the bad news about the growing demise of the Social Security funding.
    That is the time I realized that retirement for me was not going to be lazing on a beach somewhere with arms full of Pina Coladas, or endless world travels.
    Instead, I took stock of the situation and planned out a solution. Living in the Washington DC area would have to go for retirement purposes. My IRA got restructured into an income producing account. I moved to a place where I would be able to live cheaply for the next few years while I invested everything that I had coming in that I was not having to use for medical expenses. (Remember, Medicare does not cover dental, eye, etc.) The private insurance that does cover a fraction of those expenses makes you wait for a year while you pay in to it as well as cover the 1000’s of $ surgeries etc will cost you meanwhile if you have an emergency.

    So basically, after I finish up with health expenses (I just received word that my Drug Prescription coverage is going up 30% for next year, and I don’t use it–I need to research and see if they’ve taken out the penalty for our dropping Medicare drug insurance coverage yet); So, basically I am preparing by living very frugally, and everything I have coming in that I don’t absolutely need to live on will be going into my investment accounts to raise the income levels up to what I will need to replace all of my current Social Security income, as I have very little faith that the government will try to fix anything as their infrastructure decays and thei r spending increases exponentially in the future.

    by KEM — September 20, 2018

  21. Our option for a Social Security shortfall is to obtain a reverse mortgage. With no family members who require an inheritance, our house equity could shore up investments. The return on that additional capital, COMBINED with the elimination of our mortgage payments, should make up the difference. (In our case, a 2% return is sufficient in current dollars).
    A less desirable alternative is the direct use of reverse mortgage capital COMBINED with mortgage payment elimination. That would outlast even a very extended life expectancy by few dozen years.
    Of course that does not account for Medicare reductions.
    If Medicare is substantially impacted, then outliving investments is probably less of a problem !
    – Another Bob

    by Bob — September 21, 2018

  22. So that the comments don’t stray away from Social Security, we moved Jennifer’s and KEM’s discussion of choosing where to live in retirement to a different Blog: 10 Things Your Retirement Town Needs to Offer

    by Jane at Topretirements — September 22, 2018

  23. To Ron who suggested switching employees to FICA:

    Since 1984, FICA taxes have been paid by all members of Congress, the President, the Vice President, all sitting federal judges which includes the Supreme Court justices, legislative branch employees, executive-level political appointees, and all newly-hired federal employees. That’s almost 35 years! There are very few jobs that are not covered by FICA taxes.

    Editor’s note: Thank you for that correction Jean. We continue to be amazed at how often the misinformation about Congress not paying into Social Security is discussed. See

    Similar misinformation keeps getting circulated about their healthcare (they have to buy it on an exchange).

    Finally, there is more misinformation about Congressional pensions. They are now part of FERS and not eligible until they have served 5 years of service and reach 62 years of age. Congress has lots of flaws, but at least they are part of the SS system, have to buy their health care like most employees, and do not receive lifetime pensions after 1 term.

    by Jean — September 23, 2018

  24. Everybody has their own take on this problem. SS is unreformable, the simple truth is that their are too many people drawing out of SS who never paid any money in. The politicians have basically broken SS like they do to everything else they control. No amount of number juggling will ever fix the problem. And asking a politician to fix SS is like asking your local Baker to fix your car years I ascribed to proper planning and getting ready for this nightmare that retirement will turn into. I took my SS when I was 64. My knees were shot from nearly 50 years of getting on and off heavy equipment. The old adage applies here, if you don’t take of yourself, nobody else will.

    by Steven — September 23, 2018

  25. To help the discussion stay on track of what You will do If Social Security payments pay only 77% in 2034, we moved a new comment from Clyde to a different blog for a better fit:

    Fewer and Fewer Workers to Support Baby Boomers Social Security

    by Jane at Topretirements — September 23, 2018

  26. Unfortunately, I agree with Steven. SS is broken and it’s not going to get fixed. The politicians have no desire to fix it, they do not care. SS does not affect their retirement. OK, what to do?
    I will not let myself a victim of SS. A 23% reduction in SS represents around $400 a month. Plus or minus a bit.
    I see that I have 2 choices, whine and complain, but nothing will happen to get my money back. I refuse to chose this path.
    Here is the part that most folks will not like. I have made my retirement plans expecting to get no or very little of the SS due to me. I think it stinks, but what can be done. I think nothing.
    I suggest that everyone do more personal planning for your retirement.
    Work more, plan more, but complaining about what we have known for years is just being foolish.
    I plan to draw SS at 62, if it is still available to me in a few years.
    I am currently working and planning a retirement where SS is gravy. I am not trying to sound heartless, but I will not be a victim because I accept reality.

    by John — September 23, 2018

  27. To John: We can make a difference by voting in the midterm elections. Oust the candidates that want to slash Social Security and vote in the ones that want to help it. Having the right people in Congress is the only way that SS will be fixed. #MarchToVote


    by Tom — September 24, 2018

  28. Tom, I live in Washington, DC and I totally agree–voting and also letter writing or emailing your representatives until they get the message that you mean business makes a big difference. Your representatives need to know what you want them to do. There is too much of a silent majority in this country. Phone calls can also be a great tool. They keep logs of opinions, all correspondence must be answered within a certain time frame, usually two weeks. So lets get to it!

    by Jennifer — September 26, 2018

  29. A link to the voting record of the House and Senate on issues that affect retirees:

    by Mike — September 26, 2018

  30. Mike–thank you for your post with the links.

    by Jennifer — September 27, 2018

  31. Another source on voting records

    by Mike — September 28, 2018

  32. I agree with JCarol’s math. For completeness’ sake if that same woman waited until her FRA of 66 yrs 4 months,
    the math looks like this:
    4 yrs 4 mos @ $0 per month (age 62- 66 yrs 4 mos) = $ 0
    11yrs 8 mos @$1300 per month (age 66 yrs 4 mos to 78 in 2034) = $176,800
    6 yrs @$1001 per month (to death at age 84) =$72,072
    Total collected until death =$248,872 ($5672 less than waiting until age 70)

    Of course we all know that determining the age of death is a crapshoot, so it depends how much risk one wants to take on based on current health status and family genetics. However, for those of you who do not have a pension, but have accumulated a substantial amount in tax-deferred IRA and/or 401K/403B accounts, waiting until age 70 to draw SS benefits might enable you to transfer more money out your tax deferred accounts while remaining in a lower tax bracket- how much money will depend on whether the new tax laws get extended past 2026, which is another uncertainty.

    Editors comment: Thanks Bridgette. One small point to add on that makes waiting more beneficial. If COLAs are paid they will be calculated and compounded on a higher amount if you delay.

    by Brigitte — October 24, 2018

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