Social Security is a critical source of income for seniors, which is why many current workers and retired Americans worry about its financial troubles. Specifically, the Social Security Trustees report released in June of 2026 confirmed long-held fears that the program’s trust fund is in danger of running dry.
By the end of 2032, the Old-Age and Survivors Insurance (OASI) trust fund is scheduled to be depleted, which means only the revenue being collected at that time can be used to pay benefits. This outcome leads to an automatic 22% cut in benefits, as there’s only enough incoming revenue to cover 78% of the promised amount.
However, while most seniors have heard about this issue, far too many are not factoring it into their retirement plan. In fact, there’s a hidden problem many seniors aren’t aware of that is going to magnify the damage from a potential future benefit cut.
Here’s what the issue is, along with details on why it’s going to be so damaging for many of the most vulnerable retirees.
This problem could put your financial security at risk
The hidden Social Security problem that’s flying under the radar for many retirees relates to the impact of an early benefits claim.
Right now, age 62 is the most popular age to claim Social Security benefits. Around a quarter of seniors start benefits then. Claiming at 62 is popular because it’s the earliest age when benefits become available. But it’s considered an early claim because it’s before full retirement age, which is 67 for anyone born in 1960 or later.
Unfortunately, when you claim at 62, and your full retirement age is 67, you reduce the benefit you’ll collect by 30% compared to your standard benefit (the amount you’d have collected at your full retirement age).
This reduction in benefits from an early claim could become a financial disaster if it combines with an automatic cut from the trust fund running dry. This is the hidden Social Security problem many retirees don’t know they’re facing.
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An early claim combined with benefit cuts could leave retirees struggling
The reality is that an early claim always makes it harder for seniors to make ends meet because they have a lot less money to live on. If you’d been on track for a standard benefit of around $2,000 (pretty close to the average), a claim at 62 instead of an FRA of 67 would force you to live on just $1,400 per month instead.
That’s hard enough, and it means you’ll almost definitely need a lot of extra income to supplement your benefits. But if the 22% cuts happen, you’ll really be in dire straits. Your $1,400 benefit will drop to just $1,092, leaving your annual income below the federal poverty level.
Now, it’s true that those with larger benefits face a bigger dollar-for-dollar reduction in benefits. A $1,400 benefit reduced by 22% loses $308, while a $2,000 benefit loses $440. But it’s a lot harder to make ends meet when you’re left with $1,092 than with $1,560.
The person who fares the best is the one who waited until 70
For those who want to maximize the income they have left if benefit cuts happen, the best way to do that is to increase your benefit as much as possible. This means waiting to claim until age 70. Delaying your claim until 70 increases your standard benefit by 24% if you have a full retirement age of 67.
This delay takes a $2,000 standard benefit and bumps it to $2,480. In this case, if the 22% benefit cut hits when the trust fund runs dry, you’re still left with $1,934 in monthly benefits.
Of course, you’re passing up years of benefits. And, depending on your current age, you could end up passing up some of the last few years of Social Security income before the benefit cut hits. You’ll need to take all of these factors into account when deciding if a delayed claim makes sense.
The losses from an early claim compound over time
It’s also worth noting that claiming early doesn’t just affect your current benefit. Because periodic cost of living adjustments are applied as a percent of your existing benefit, your dollar-for-dollar increase each year is going to be smaller if you claimed Social Security early.
If you’re getting a $1,400 benefit and receive a 2.5% COLA, your monthly income increases by $35 compared with $50 if you were collecting $2,000 to start. Every COLA for life will be smaller on a dollar-for-dollar basis due to the shrunken benefit.
Those who claimed late, on the other hand, are effectively buying inflation protection with this delay since their higher starting Social Security benefit means they’ll have more income with automatic inflation adjustments built in.
If you were the higher earner, your survivor benefits are also going to be smaller because of your early claim, as your spouse gets to keep the benefit you were collecting or, if you haven’t claimed yet, the benefit you were entitled to at full retirement age plus any delayed retirement credits you’d earned.
Benefit cuts aren’t guaranteed
While benefit cuts are expected soon, there’s no guarantee they’ll actually occur. Congress reformed Social Security in 1983 to shore up its finances, and odds are good they’ll probably do it again. A large 22% automatic benefit cut would be hugely unpopular, so lawmakers may feel compelled to act to stop it.
Even if this happens, the basic premise still holds, though. Claiming Social Security early reduces your monthly benefit dramatically and often results in you receiving less lifetime income as well.
An early claim makes sense in some circumstances
Losing a big portion of your Social Security because of an early claim is definitely a financial hit, especially when you risk another big cut to benefits when Social Security’s trust fund runs out. But there are times when an early claim may make sense.
If you are in poor health or you expect your life expectancy to be short, you benefit from claiming early, as you may not otherwise live long enough to collect enough benefits to break even for delaying. After all, if you give up as much as eight years of Social Security benefits from 62 to 70, you have to collect your higher future benefit for many years to make up for the money you didn’t earn during that timeframe.
If you need the income to retire early or have been laid off and are unable to find another job, you may also decide an early claim makes sense. But just be aware of the significant downsides of starting your checks so young, and that Social Security’s looming crisis could only worsen the situation.
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Bottom line
Failing to understand the truth about Social Security’s problems could be one of the biggest financial mistakes you make in your retirement planning. If you save, invest, and set yourself up to delay a Social Security claim, you’ll be better positioned to be able to withstand any changes to the Social Security program that come along.
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Author Details
Christy Rakoczy Bieber
Christy Rakoczy Bieber is an attorney turned personal finance writer who has spent 17 years helping readers understand Social Security: the claiming rules, the policy shifts, and the fine print that can mean thousands of dollars in lifetime income. Her work has appeared in Kiplinger, Forbes, The Motley Fool, and the Wall Street Journal.
