“Right now, we only reduce projected Social Security benefits in our modeling for those clients who ask us to,” Garry said. “Once or twice we’ve had clients say they think they’ll get nothing and we do that projection for them. If this shortfall is still an issue maybe five to eight years from now, I’ll start to worry."
Emily M. Harper, a private wealth manager at Monument Wealth Management in Alexandria, VA, said the projected Social Security shortfall is “still pretty far down the tracks” given that there’s potential for Congress to act to implement solutions.
High-net-worth clients depend on Social Security less. But clients who rely on Social Security for a large percentage of their retirement income, especially those who take a permanent reduction in benefits by filing before their full retirement age, will be the most impacted if benefit cuts become a reality, Harper said.
“We have not had specific conversations about potential cuts occurring as early as 2031—this is speculative,” she added. But “the benefit of working with a financial planner to map projected lifetime cash flows and evaluate the likelihood of the portfolio meeting a client’s desired goals over their lifetime. We can diagnose if a 25% reduction is truly going to be a problem for a client’s long-term success and which levers will provide the best outcome, whether it’s working longer, saving more now while they can or spending less."
Jonathan Harrington, a financial planner at Milestone Financial Planning in Bedford, N.H., echoed those sentiments. “Clients that are nearing retirement should focus on what they can control. Regardless of what happens with Social Security benefits in five, 11 or 14 years. It’s all speculation in my opinion,” Harrington said.
Right now “people can choose to spend less and save more, which will create the conditions for a period of retirement that is less dependent on social security benefits,” Harrington added.
The CBO report on the Social Security Trust Funds is available here.