Social Security’s Shortfall is a Planning Risk, Not Just a Policy Problem
Mathew Greenwald | October 13, 2026
Financial professionals and retirement companies need to address a major retirement-income risk that receives too little attention: the projected depletion of the Social Security Trust Fund. When the Trust Fund is depleted, which is expected in six years, dedicated Social Security tax revenue is expected to cover only 78% of scheduled benefits. Avoiding benefit reductions would require roughly $400 billion per year in additional funding in the first year with the need growing significantly over time.
Despite that risk, the retirement industry often seems to plan as though benefit levels will remain unchanged. I have seen far too little discussion of the possibility of reduced benefits, and limited evidence that financial professionals are preparing clients for potential benefit reductions, or that retirement companies are communicating this risk to plan participants, advisors, or readers of their thought-leadership content.
The Potential Fallout
Is there really a zero percent chance that benefits will be cut? I do not think so. Federal debt is already more than $40 trillion and rising quickly. The Congressional Budget Office projects a federal deficit of $2.1 trillion in 2026, growing to $52 trillion in 2032. In our fiscal environment, borrowing another $400 billion annually to maintain scheduled Social Security benefits would be difficult. The bond market can tolerate only so much debt, and we may already be approaching that limit, before adding a large additional annual burden.
If debt is not used to preserve scheduled benefits, the money will have to come from new Social Security taxes, reduced Social Security benefits, or some combination of the two. Benefit cuts would unquestionably be politically difficult. Social Security is arguably the most popular federal program, and millions of retirees depend on it for financial security. But raising payroll taxes on employers and employees would be politically difficult as well.
The last time the Social Security Trust Fund was depleted in 1982 (a much smaller shortfall than what we are facing now), the shortfall was addressed through a mix of higher Social Security taxes and lower benefits, implemented largely by gradually increasing the age of entitlement for full benefits by two years, from age 65 to age 67. That change effectively reduced lifetime benefits. (For every year the age of entitlement went up, the level of benefits went down by 8% for people retiring at a fixed age.) Policymakers then had the luxury of time to phase in fiscal support: the increase in the age of entitlement for full benefits was delayed and then phased in gradually. Today, we do not have that same cushion of time. Indeed, there is every indication that Congress will put off addressing the Social Security funding gap until close to the time the Trust Fund is depleted, making every solution more draconian than it is now.
The point is not to predict the final policy package. It is to recognize that meaningful Social Security benefit reductions are possible, if not probable, and depending on the policy response, they could be implemented very quickly.
It is also possible, and I think more likely probable, that any benefit cuts would fall disproportionately on higher-income people who are most likely to be served by financial professionals.
Planning for the Risk
Many financial professionals work primarily with households that have at least $250,000 in investable assets: about 60% of households led by someone ages 55 to 75 have less than that amount. Married Social Security beneficiaries at the 60th percentile of assets receive about $54,000 in annual Social Security benefits. A 10% reduction would mean a loss of $5,400 per year. With 3% inflation, that would amount to a loss of roughly $145,000 over a 20-year retirement. I think that level of potential loss is worth discussing with clients and retirement plan participants. And the risk is larger: please remember that the last time the Trust Fund was depleted, benefits were effectively reduced by 16%, not 10%, for low- and high-income people alike.
Retirement companies seem understandably hesitant to recommend a specific solution to the Social Security funding gap. But they should not ignore a material risk to the financial security of the people they serve. If benefit reductions are at least possible and more likely probable, for the next generation of retirees, and perhaps for some current retirees, the time to plan for that possibility is now. Retirement planning is, at its core, the work of identifying risks and preparing for them. By that standard, the Social Security shortfall belongs in the planning conversation.
