Wealth Planning Commentary – June 2, 2025

Recent Trends in Social Security Claims 

According to the New York Times, early claims for Social Security benefits have increased by 13% since the beginning of the year. This rise is notable, especially considering the Social Security Trust Fund's projected depletion timeline remains unchanged. The current surge in early claims appears to stem from heightened concerns regarding the program's long-term solvency, which may be attributed to ongoing policy discussions and anxieties surrounding the national deficit. 

The question of whether to claim Social Security benefits early warrants careful consideration. Generally, doing so results in a significantly lower monthly benefit, typically around 30% less than one would receive by waiting until full retirement age or even later. Therefore, for those who believe the government will find a way to ensure Social Security's continued funding beyond its current projected depletion date of 2035, claiming early is usually not advisable. An exception might arise if an individual's life expectancy is anticipated to be shorter than forecasted. Additionally, married couples can sometimes obtain a greater overall benefit when the lower-earning spouse claims early and then switches to their spousal benefit later. 

It is important to remember that approximately 70 million individuals depend on Social Security for financial security in retirement. There is a broad consensus that Social Security will be a central issue in the 2028 and 2032 elections, with recipients likely favoring administrations committed to securing the program's future. 

Congress possesses several mechanisms to maintain the viability of this widely utilized benefit. These include, but are not limited to, raising payroll taxes, increasing the full retirement age, and implementing various other tax adjustments, independently or in combination with changes to the retirement age. 

We advocate for delaying Social Security benefits in many, if not most, situations. This strategy often serves as a form of longevity insurance, providing a higher, inflation-adjusted income stream over the long term, which is particularly advantageous when one's health and life expectancy are favorable. 

Please reach out to your Wealth Manager with questions about Social Security. 

Since we are on the topic… 

The "One Big Beautiful Bill Act" passed by the House of Representatives on May 22^nd does not eliminate taxation on Social Security benefits. However, the bill in its current form proposes an enhanced standard deduction of $4,000 for seniors ages 65 and older for tax years 2025 through 2028, which may offer some relief to certain income levels (below a Modified Adjusted Gross Income of $75,000 for individuals and $150,000 for couples). Note that the bill is subject to change during the legislative process and is currently being negotiated in the Senate.  Wealth Manager with questions.