If you’re a Gen X-er like me, you’ve probably noticed something unsettling about your retirement planning: you’re the first generation that will retire after Social Security needs a major overhaul, AND the first generation in a while to get no clear answers about what those changes will be.
Reality Bites
In 2024, Social Security took in about $1.26 Trillion dollars from all of us working stiffs. On the other hand, it paid out $1.48 Trillion. The difference is then paid out of their assets, currently estimated to be $3.1 Trillion. Social Security is only allowed to invest in one asset, US Treasuries. This is why Treasury interest rates matter as higher rates mean the trust fund earns more, which can slow down how fast it runs out of money.
We’ve probably heard it 100 times by now, but if current projections come true, then the Social Security’s combined trust funds are projected to run out in the early 2030s. It’s hard to know exactly when Social Security will run out of money because it depends on so many different factors. Trying to predict how much people pay in, how long retirees might live, and then guessing what inflation might be going forward matters since it impacts the annual cost of living increase.
Clueless
In January 2025, Congress passed the Social Security Fairness Act (SSFA), signed into law by President Biden. The law repealed two long-standing provisions designed to limit benefits for public-sector retirees who had pensions from jobs not covered by Social Security. For example, many teachers in Rhode Island work in towns where they don’t pay in to Social Security. Instead, they pay more into the Rhode Island Pension. With the passing of this bill, however, they suddenly became eligible for benefits.
On the surface, it looks like a win for these retirees, which it is. But with the system already running out of money, it’s a really weird decision to make since it accelerates risk to Social Security’s long-term solvency, and I and the rest of the Gen X-ers are going to potentially pay the price. Unlike Boomers who are already collecting benefits, or Millennials, who have time to adjust, us Gen-X-ers are in the perfect storm of timing, insufficient savings, and policy uncertainty.
Dazed and Confused
This issue is really a “will they or won’t they?” for the elected officials in Washington DC. Are they really going to let the system run out of money? Keep in mind if they do, it’s not that our benefits will suddenly disappear. The laws of Social Security state that if they do deplete the nest egg, the program still needs to pay out what the workers are paying in. The current estimates are for benefits to drop 25-30%.
As a financial advisor to many Gen X-ers, we do get this question a lot when it comes to retirement planning. Thankfully, the financial planning software we use allows me to quickly and easily show someone how that could impact their own retirement. (Not currently a StrategicPoint client, but interested in seeing how we can help? Click here to schedule a meeting today!)
But what can WE do if we’re really worried (besides yell at our Senators and congressmen and women)? These 3 tips are a good start:
- Save as aggressively as you can – Every extra dollar you put into retirement accounts today is something you control, unlike future Social Security benefits.
- Diversify your savings across tax-advantaged and taxable accounts (Roths, 401(k)s, IRAs, after-tax investments) to create flexibility and tax diversification. (Read my previous blog about the dangers of having all savings in a 401k)
- Plan for flexibility in retirement – Be ready to adjust your lifestyle, work part-time, or tap other resources; having a backup plan reduces dependence on Social Security.
- Maybe file for benefits later- This one feels counterintuitive, in that if the program is running out of money, wouldn’t we want to run down and file right away? Not necessarily. If they do deplete the savings, the 25-30% haircut would probably impact all retirees equally. Delaying from age 67 (the full retirement age for Gen X-ers) to 70, you actually get about 25% more in your benefits. So that would mean if the cuts did occur and you delayed until 70, the benefits you receive after the cut would still be equal to your full retirement benefits.
The Bottom Line
For Gen-X, the takeaway is clear: don’t assume Social Security will fully replace your income. Use it strategically, but plan to rely on your own savings and flexibility. The strongest retirement plan isn’t based on hope — it’s based on preparation.
Derek Amey serves as Managing Partner and CIO at StrategicPoint Investment Advisors in Providence and East Greenwich. You can e-mail him at damey@strategicpoint.com.
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