In today’s episode, we’re diving into the latest press release from the Social Security Board of Trustees. The numbers this year look worse than last year—and that has real implications for your retirement.
I
Articles, Links & Resources:
Social Security Board of Trustees: Projection for Combined Trust Funds One Year Sooner than Last Year
Social Security Maximum Earnings Table for 2025
Norway Soverign Wealth Fund
Canadian Soverign Wealth Fund
CalPERS Investing
S&P500 Returns – Motley Fool
Transcript:
456 Don’t Panic—Plan- Social Security’s Future and Your Retirement
Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now here is your host, Jason Parker,
Jason Parker: America. So glad to have you tune in into episode number 456.
The title is Don’t Panic. Plan, social Security’s Future, and Your Retirement. In today’s episode, we’re diving into the latest press release from the Social Security Board of Trustees. The numbers this year look worse than last year, and that has real implications for your retirement. I. More importantly, we’re gonna look at what this means for your financial future, what actions you can take now, and what reforms have been considered to help shore up the system.
As always, articles, links, and resources can be found@soundretirementplanning.com. Just click on episode number 456. But before we dive into this episode, I like to start the day by renewing our mind and I have a verse here from us from Proverbs 1522. Plans fail for lack of counsel. But with many advisors, they succeed.
And then something fun for the grandkids. Why are elephants always ready to swim? They’re wearing their trunks all the time. Why do pirates like swimming so much? I. They love all the cannonballs.
Okay, so let’s start out with some of the highlights from this year’s Social Security trustees report. The Social Security Board of trustees today released its annual report on the financial status of the Social Security Trust funds. The combined reserves of the old age and survivor’s insurance and disability insurance, which is referred to as the OASI and DI Trust funds that are projected to have enough dedicated revenue to pay all scheduled benefits and associated administrative costs until 2034.
Which is one year earlier than projected last year with 81% of benefits payable at that time. As a side note, the report last year had the fund depleted in the year 2035, and it was a 17% reduction in benefits. Now it’s the year 2034 with a 19% reduction in benefits. Here are a couple of the bullet points from the 2025 annual report to Congress.
Number one, the reserves of the combined OASI and DI trust funds declined by $67 billion in 2024 to a total of 2.72 trillion. The total annual cost of the program is projected to exceed total annual income in 2025 and remain higher throughout the 75 year projection period. Total cost began to be higher than total income in 2021.
Social Security’s cost has exceeded its non-interest income since 2010. If Congress does not act combined, trust fund reserves are currently projected to become depleted in 2034. At that time, there would be sufficient income coming in to pay 81% of scheduled benefits. Total income, including interest to the combined OASI and DI trust funds amounted to $1.42 trillion in 2024.
That was 1.29 trillion from net payroll tax contributions 55 billion from taxation of benefits. And $69 billion in interest. Total expenditures from the combined OASI and DI trust funds amounted to 1.48 trillion in 2024. The projected actuarial deficit over the 75 year long range period is 3.82% of taxable payroll higher than the 3.5% projection in last year’s report.
And then finally, the cost of $7.4 billion to administer the Social Security Program in 2024 was a very low 0.5% of total expenditures. Social Security remains a valuable benefit. It’s inflation adjusted. It provides tax efficient income. It includes important features like spousal and survivor benefits, and delayed retirement credits can boost your monthly benefit.
If you wait to claim all the way up until age 70, that’s the latest you would start your social security. But here’s the big question on everybody’s mind. If benefits are reduced by 19% in 2034, what impact will that have on your specific retirement plan? And there’s really only one way to know the answer.
You have to model it. So in the retirement budget calculator, our new social security strategy tool not only helps you identify how to get the most lifetime income between two spouses, but also does something most calculators don’t. It shows you how your claiming decision impacts your total lifetime taxes and how much money you’ll have left at the end of your life based on when you start Social Security.
If you’re looking at social security and isolation and only optimizing for how to get the most social security over two people’s lifetime, it doesn’t give you the full picture. It’s only when you integrate it into your complete retirement plan that the trade-offs become clear. Plus we’ve added a powerful new feature that lets you model a social security reduction, and this is now updated so that you can see the impact of a 19% cut to your social security starting in the year 2034, just like the social security trustees report is suggesting.
And that’s what real planning looks like. It’s not about speculation or worry, it’s about seeing the numbers for yourself, and this is how you build confidence in your retirement plan. Now let’s talk about the idea of change. Social Security isn’t gonna disappear, but it will need to change. The problem isn’t change itself.
The problem is pretending that things won’t change and change is constant. That’s just life. You can fight change or you can prepare for it. History shows that those who plan ahead tend to fare better, except that change is coming and use that knowledge to build the best future possible with the information that we have today.
Here are a few quotes that I think you might enjoy about planning and change. Peter Drucker said, the best way to predict your future is to create it. Jack Welch said, change before you have to. Jim Rohn said You cannot change the circumstances, the seasons or the wind, but you can change the set of your sails.
This is the way you take control of your life. Here’s another important detail from the trustees report. The Social Security system is only allowed to invest in special issue US treasury bonds, and in 2024, those bonds earned 2.5% return. I. Now imagine if a small portion of the Social Security Trust fund had been invested in a diversified portfolio, something like the s and p 500, and yes, there’s risks involved, but if even a small percentage of the contributions collected since 1937 had been invested in equities earning historical average returns of around 10% per year, we likely wouldn’t be facing today’s conversations about benefit cuts or tax increases.
Of course we can’t change the past. It’s understandable that in the wake of the Great Depression, there was deep skepticism about investing in the stock market. But as we look to the future, I’m reminded of the quote, the best time to plant a tree was 20 years ago. The second best time is today. Let’s start planting those trees now so that our grandkids won’t have to wrestle with the same solvency questions that we’re facing today.
Many state pension systems like CalPERS already invest in diversified portfolios. Canada and Norway have successful sovereign wealth funds that invest globally. Our current social security system is built for extreme safety by only investing in special issue treasury bonds. But this highlights an important investing principle.
There’s more than one kind of risk. Be too conservative and inflation quietly erodes your future. Be too aggressive and volatility can shake your confidence. I. Every investor faces risk. One path is a slow leak, the other is a sharp drop. The key isn’t avoiding risk, it’s balancing it wisely. If you’re an elected representative listening to the show, here’s my request, stop thinking in terms of either or safe or risky.
I. Instead think in terms of both. And funds that are needed soon should be invested conservatively, but funds that won’t be needed for decades could be invested with a growth mindset. This is the same type of strategy that we use in retirement planning. Align your investments with your time horizon.
Most of the reforms being discussed are to increase taxes or reduce benefits, and there have been several ideas floated to strengthen the program. Number one, raising the full retirement age from age 67 to 69. Increasing taxes on income over $400,000. Removing the wage cap so that all income is subject to payroll taxes.
Currently in 2025, the wage cap is on $176,100. That’s subject to the tax or introducing some type of means testing. How this would work by income or assets is still unclear. Regardless of what Congress decides, you have one powerful tool at your disposal. It’s called planning, and you can use the retirement budget calculator to stress test your own retirement, apply a potential social security reduction, and see how it affects your future.
So the bottom line is let’s stop worrying and start planning.
Announcer: Thank you for tuning in to Sound Retirement Radio. For articles, links and resources from today’s show, visit sound retirement planning.com. If you enjoy the podcast, share it with a friend and give us a five star review. Ready to kickstart your retirement planning head over to retirement budget calculator.com.
Need assistance with an. Investment management explore our services@parkerfinancial.net. Information and opinions expressed here are believed to be accurate and complete for general information only and should not be construed as specific tax, legal, or financial advice for any individual and does not constitute a solicitation for any securities or insurance products.
Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance related discussions are subject to the claims paying ability of the company.
Investing involves risk. Jason Parker is the president of Parker Financial LLC, an independent fee-based wealth management firm. Located at 9 2 3 0 Bayshore Drive Northwest Suite 2 0 1, Silverdale, Washington. For additional information, call 3 6 0 3 3 7 2 7 0 1 or visit us online@soundretirementplanning.com.
