Wealthy Clients Urged to Plan for Potential Social Security Cuts

Social Security’s main retirement trust fund is projected to be depleted in 2032, after which it is expected to cover roughly 78% of scheduled benefits. Financial planners and wealth managers are telling affluent clients to run scenarios that include partial benefit reductions and to adjust retirement plans before the shortfall arrives.

Advisers recommend several responses depending on each client’s situation: delaying benefit claims for a year or two, adding retirement savings, rebalancing portfolios and testing plans with assumed benefit cuts. Ash Ahluwalia, managing director and head of Social Security planning at OneTeam Financial, said he would not advise claiming early solely out of fear that the program will run out. “I wouldn’t be racing due to Social Security to take the money early if it’s because you’re concerned they’re going to run out of money,” he said, adding that lawmakers have multiple policy options to address the shortfall.

Some firms are modeling a roughly 20% across-the-board benefit cut if Congress and the White House do not act before trust fund depletion. Jason J. Fichtner, executive director of the LIMRA Retirement Income Institute, urged planning for that outcome and encouraged clients to “hope for the best, but plan for the worst.” He suggested catch-up contributions starting at age 50 for those who can save more and recommended reassessing asset allocation for older clients with limited time to adjust.

Kaufman Rossin Wealth runs sensitivity analyses to measure clients’ reliance on Social Security and to test whether retirement plans still succeed under reduced-benefit scenarios. Jay Pelham, president of the firm, noted the practice models outcomes such as receiving only half the expected benefit and then changes asset allocation, asset location and tax planning to shore up income. Some clients increase equity exposure, move assets between taxable and tax-advantaged accounts, and plan for long-term care costs.

Advisers report generational differences in expectations. Older clients generally focus on timing when to claim benefits. Younger workers often assume benefits will be smaller or unavailable by retirement and planners sometimes model retirement without counting Social Security at all, according to Robert Conzo, CEO of The Wealth Alliance.

Practical steps discussed with clients include contributing more to 401(k)s and IRAs, taking catch-up contributions after age 50, working longer or part time in early retirement, reducing planned college funding to increase retirement savings, and downsizing a home to lower expenses and raise liquidity. Advisers say even wealthy clients with ample savings can feel anxious about potential cuts, while households that rely heavily on Social Security face more immediate risks.

No single policy solution has emerged from lawmakers. Until there is a legislative fix, advisers are recommending that clients and their planners test retirement plans under several benefit-reduction scenarios, communicate trade-offs, and use available levers-delaying claims, saving more now or reallocating investments-to reduce dependence on a program facing funding pressure over the next decade.