Don’t make hasty decisions about when to start your Social Security benefits.
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Social Security’s main trust fund is projected to run short in 2032, raising the possibility of across‑the‑board benefit cuts. For pre‑retirees in their early 60s, that timeline sits squarely inside their claiming window — and it’s prompting a critical question: does the risk of future reductions make it smarter to start benefits early?
If you’re worried that Social Security benefits might be reduced due to ongoing funding challenges, it’s understandable. And before you make a hasty claiming decision you can’t undo, it’s worth taking a closer look at what the projections actually mean — and how they should (or shouldn’t) influence your filing strategy.
What Happens If Congress Doesn’t Act?
There’s no precedent for the Social Security trust funds being exhausted and Congress doing nothing to close the funding gap. And there are no published rules specifying how benefits would be reduced for retirees and beneficiaries. So we don’t know exactly what will happen.
All we know is that if the trust funds are exhausted, the only source for paying Social Security benefits will be the FICA taxes that then-current workers pay. At that time, Social Security benefits would need to be reduced so that the aggregate benefits paid match the aggregate FICA taxes collected.
If benefits were reduced across the board on a percentage basis, the funding percentages shown previously would equal the percentage of your benefit you’d receive.
It’s important to note that Social Security is highly unlikely to go bankrupt, and you won’t lose all your benefits.
Also keep in mind that no politician has yet advocated for reducing the benefits of current retirees and near retirees, and President Trump has repeatedly promised not to cut Social Security benefits.
How Would Potential Cuts Affect Your Claiming Strategy?
Many retirement analysts, including me, suggest that the current optimum strategy for claiming Social Security benefits is often to delay the start of benefits for as long as possible. In many cases, the optimum starting age is 70, which is the maximum starting age with the highest monthly benefit. However, this conclusion assumes future benefits won’t be reduced.
For the sake of this piece, however, suppose you’re pessimistic that polarized federal politicians will agree on a solution to close Social Security’s projected funding gap. Let’s also assume a worst-case scenario — that Social Security benefits would be reduced by 22% near the end of 2032.
In this case, here’s an important question: Should you start your Social Security benefits as soon as possible so you at least receive some money before benefits are cut?
I asked this question of Mike Piper, developer of the free online system Open Social Security, which analyzes optimal claiming strategies. Piper’s answer: “It does indeed push the decision in favor of filing earlier, though whether that push will overcome the various other factors will vary case by case.” Piper also points out that the closer you get to the year Social Security benefits might be reduced, the less you might gain by claiming Social Security benefits early.
What The Numbers Show
After getting Piper’s input, I used his Open Social Security system to see how the optimum strategy could vary for a few hypothetical pre-retirees. Piper’s system prepares recommendations by comparing the estimated present value of your lifetime benefits for all possible starting ages, based on your particular circumstances.
The Open Social Security system has a feature that allows you to assume a future reduction in your benefits. I assumed that benefits would be reduced by 22% at the beginning of 2033, right after after the 2026 Social Security Trustees Report projects the trust fund will be exhausted.
To properly analyze someone’s optimal claiming strategy, Piper’s system needs you to input your monthly “primary insurance amount,” which is the projected benefit at your Social Security full retirement age (age 67 for most pre-retirees). The PIA amounts I assumed are noted below in the hypothetical examples. Piper’s system shows how you can estimate your PIA if you don’t know.
For the sake of these tests, I also assumed all hypothetical pre-retirees would have better-than-average health, which might apply to readers who have a college education and above-average wealth and earnings.
These analyses show that the optimum financial strategy depends in part on your marital status and gender. Let’s take a look.
Married Couple: No Change In The Optimal Strategy
I assumed that both spouses of a hypothetical married couple reach age 62 in January 2027. I assumed the monthly PIA was $2,000 for the husband and $1,000 for the wife, a common situation.
In this example, assuming no future reduction in Social Security benefits, the optimal claiming strategy is for the husband to start his Social Security benefits at age 70, and for the wife to start her Social Security at age 62 and one month. The optimal starting age didn’t change if I assumed the future benefits reduction noted previously.
Single Man: Optimal Claiming Age Drops Significantly
I assumed that a hypothetical single man reaches age 62 in January 2027 with a monthly PIA amount of $2,000. In this example, assuming no future reduction in Social Security benefits, the optimal claiming age is age 67 and 11 months. However, the optimal claiming age drops more than five years to age 62 and 3 months, assuming the future reduction in Social Security benefits described previously.
Single Woman: Optimal Claiming Age Drops Moderately
I assumed that a hypothetical single woman reaches age 62 in January 2027 with a monthly PIA amount of $2,000. In this example, assuming no future reduction in Social Security benefits, the optimal claiming age is age 68 and 11 months. However, the optimal claiming age drops more than three years to age 65 and 5 months, assuming the future reduction in Social Security benefits described previously.
Other Factors To Weigh
As you can see with these three examples, the impact on the optimal claiming age varies significantly depending on your marital status and gender. Another important factor is your health and your estimated lifespan.
Another consideration is that a present value analysis is just one factor in deciding when to start Social Security benefits. Instead, you might consider your cashflow in your later years. For example, there could be good reasons to maximize your Social Security benefit by waiting to claim it if you want to maximize your monthly incomes in your later years to help protect against cognitive decline, when you’re less able to manage your finances.
You’ll also want to consider Social Security’s earnings test, which can temporarily reduce Social Security benefits before your Full Retirement Age (currently age 67) because you continue to work for income. This would impact the analysis for both the hypothetical single pre-retirees.
One factor to consider with all these analyses is that whether you claim Social Security benefits as soon as possible or you delay your benefits, you still won’t escape a benefits reduction if it takes place. In many cases, it’s better to realize 78% of a larger benefits amount compared to 78% of a smaller amount, which supports the case to delay claiming your Social Security benefits.
Here’s yet another consideration: It’s possible that benefits might be reduced for a short period, but then politicians will restore benefits due to potentially extreme blowback from older voters. If this happened, you could be stuck with an early claiming decision that provides fewer funds that you could have received.
For most retirees, Social Security benefits will be the bedrock of your financial security in retirement. Because of this, it’s well worth your time to research your optimum Social Security claiming strategy in light of your personal circumstances and your optimism or pessimism that our politicians will take the responsible action to shore up Social Security’s finances.
