Social Security’s Reckoning: Dr. Jason Fichtner Explains What the New Trustees Report Means for 401(k) Savers

The 2032 Insolvency Cliff: The newly released 2026 Social Security Trustees report projects that the primary retirement trust fund will be depleted by late 2032—just over six years away.

The Cost of Inaction: If Congress fails to pass structural reforms before late 2032, the program will only be able to cover roughly 78% of scheduled benefits, triggering an overnight 20% to 22% cut to monthly checks.

Claiming Strategies Remain Unchanged: Despite the insolvency outlook, delaying benefits up to age 70 remains the optimal strategy for clients who can afford it, locking in a guaranteed, inflation-protected 8% benefit increase for every year delayed.

Rebuilding the Three-Legged Stool: With defined benefit pensions gone and Social Security facing a funding gap, defined contribution plans must evolve from accumulation vehicles into personal pensions that actively generate protected lifetime income.

SECURE 3.0 on the Horizon: Bipartisan momentum is building toward a potential SECURE 3.0 package within the next two years to streamline automatic enrollment, enhance plan portability, and reduce remaining friction for embedding annuities into 401(k) plans.

Jason Fichtner: [00:00:00] the trustees have all consistently said every year that Congress has to act sooner rather than later to avoid disruptions and larger benefit changes or tax changes.

 But we’re six short years away. Sooner is now here.

Brian Anderson: This is 401(k) Specialist editor-in-chief Brian Anderson, and this is the 401(k) Specialist podcast. As you are probably aware, the 2026 Social Security Trustees report was released recently, and it had some more bad news regarding the solvency of the trust funds paying out benefits to more than 75 million Americans every month.

 The report’s latest projection is that it’ll become depleted sometime in late in the year 2032, only a little more than six years from now. If nothing were to be done by Congress, insolvency would mean by current calculations, a 22% cut to monthly benefit checks, or about, a decrease of about 500 bucks a month for the average retiree.

 We wanted to dig a little bit deeper into this issue, and we couldn’t think of a better person to ask about it than Jason Fichtner, who is executive director of the Limmer Retirement [00:01:00] Income Institute, a former acting deputy commissioner of the Social Security Administration, and is currently or has been involved as a board member or senior fellow with more retirement industry organizations than we have time to mention.

 Jason, thanks for joining me today on the 401(k) Specialist podcast.

Jason Fichtner: Oh, it’s a pleasure to be here. Thanks for having me.

Brian Anderson: All right. Well, I’m hoping to touch on a couple of other topics a little later in the podcast, but to start with, let’s talk about that Social Security Trustees report. Perhaps the main headline was that the timeline for the main trust fund’s insolvency got moved up again now to, late 2032.

I’m curious as to what you thought about this year’s report and how alarmed Americans should be at this point about the financial state of the program

Jason Fichtner: I think it’s really important that the public now realize a few things with this current trustees report that came out for 2026. The first, as you mentioned, is that the primary trust fund for the retirement program is just a short six years away from trust fund depletion.

Now first, what does that mean? It does not mean Social Security is [00:02:00] going bankrupt, but as you said in the opening, it means that they will not be able to pay full benefits if Congress does not act to reform the program, and would only be able to cover about 78% of what is scheduled to be paid out, after 2032.

Which means beneficiaries could see a 20% reduction to their benefits overnight or a delay in payments until there was enough money in the trust fund to pay full benefits, but that delay over the course of a year would still add up to a 22% reduction. And now that we’re six short years away, that is an issue to be concerned about because while I don’t see Congress actually letting a benefit cut happen, you could see them taking this to the very last minute or, as we’ve seen with current congresses, going past the last minute and doing something that would require short-term borrowing, which could disrupt the financial markets, the bond markets.

Could disrupt retirees’ payments of Social Security benefits. It could be delayed. So those are issues for concerns. And the second takeaway is that the trust fund has a large [00:03:00] deficit that needs to be made up. There’s no free lunch here. There’s gonna have to be some policy changes, and whether that’s on the tax side, on the benefit side, or some sort of borrowing or a combination of the three, the sooner Congress acts, the better.

And for the last two decades, these trustees’ reports have been coming out, and whether it’s under a Republican or Democratic administration, the trustees have all consistently said every year that Congress has to act sooner rather than later to avoid disruptions and larger benefit changes or tax changes.

 But we’re six short years away. Sooner is now here. We have to do this now. And we have an election coming up this year in 2026 in which the people running for Senate will have a six-year term. That would include trust fund depletion, so they’re gonna have to deal with it. And 2028, the next president who’s elected will have to deal with Social Security as well.

So people should be putting this front and center on the candidates’ minds, on the media’s minds, and we should be talking about what this actually looks like and how we could do some real reform to shore up the Social Security program, which millions of [00:04:00] Americans rely on for their financial security in retirement.

Brian Anderson: Right. Right. Now you’ve kind of talked about why this, solvency timeline matters, and, do you think it should change how people approaching retirement think about what they’re gonna do in terms of a claiming strategy?

Jason Fichtner: So I’m one who still believes that the, for people who can afford to delay claiming, that they should do so up to age 70, ’cause anything below age 70 is a penalty.

So for example, people can start taking benefits as early as age 62. You can claim as late as 70. But the full retirement age for people like me now is 67. And if I was gonna get, say, $1,000 a month at age 67, at age 62 I’d only get $700 a month. That’s a 30% reduction. If I waited till age 70, I’d get $1,240.

That’s a 24% increase. The percentage between age 62 and age 70 is a 77% increase. Where else can you get that as a guaranteed inflation protected return and a monthly benefit check when you might need [00:05:00] it most in retirement? And if for some reason the, they were gonna reduce Social Security benefits because of trust fund depletion and Congress did nothing, I’d still rather have a 20% reduction on $1,240 than on $700.

And so I don’t think it changes the strategy of claiming. I think it’s still a personal decision. Someone should talk to their financial professional about other sources of income they have, what makes sense for them. But for each year you can delay claiming, it’s roughly an 8% increase in your monthly benefit check that’s inflation protected for the rest of your life.

And I think that doesn’t change the claiming strategy. What does change is maybe how you think about other forms of protected income you might need to shore up Social Security if there is gonna be a delay in payments or if there is some changes to the benefit formula that might change the benefits people get at various income levels.

Brian Anderson: Right. Okay. Now, you talked a little bit about how, this is coming up really fast and, Congress has been kicking the can down the road for a long time. I’m curious about what you think is the most likely way they will [00:06:00] eventually handle it, and if it’s different from the way that you think that they should handle it.

Will it have to be bipartisan and therefore, in all likelihood, contain some sort of a mix of benefit cuts and tax increases for some?

Jason Fichtner: So this is, it’s, it’s interesting you ask the question this way, what I would do versus what I think they’re gonna do. we’ve seen Congress becoming more and more dysfunctional about being able to do its business.

Before you used to have regular appropriations process in which the appropriations bills were passed by September 30th, the end of the fiscal year, and we’d start the next fiscal year with a budget. Now we’ve seen delays, we’ve seen government shutdowns, we’ve seen Congress go past the last minute and months later before even a budget is adopted or spending.

My concern is that there’s a lack of political leadership. There’s a fear of leadership right now on Capitol Hill, and they’re not ruling on a bipartisan basis to go over the cliff together to do Social Security reform. It’s gonna be forced upon them, and that might be the trust fund depletion date that forces them to do something because they don’t wanna see seniors get a 20% reduction in their [00:07:00] monthly benefit checks overnight.

So at the moment, I sort of feel like we’re gonna continue to kick the can down the road, at least past this year’s midterms, going into the 2028 presidential election. And that’ll be a campaign issue. And the question of whether or not a presidential candidate has the courage to say, “I am going to fix Social Security.”

And Social Security does not mean, you know, benefit cuts, it just means they’re gonna make it solvent, fix it, but view that as part of the campaign message. So I think that becomes part of 2028 election cycle. Going into then the final four years of trust fund depletion, Congress will maybe do a commission, which it did in ’83, to look at a variety of reforms.

And they’ll probably think more holistically than just Social Security, because we also have Medicare. That trust fund’s going insolvent around 2031. You’ve got a lot of retirement issues that are coming up in general with employer-sponsored plans. We wanna put annuities in them more. So I think there might be like a retirement security commission, and I say this because we have…

In the United States, we have national security policy, we have energy [00:08:00] policy, we have transportation policy. We don’t have retirement security policy, and it’s about time we have that. And maybe we could have a commission that would come up with something holistically to think about how we could reform retirement that includes Social Security reform as well.

Brian Anderson: Right. Well, I would love to see that. Next I’d like to ask a little bit about the uncertainty around Social Security, how, how the uncertainty around Social Security’s future affects workplace retirement plans because of this. Is saving or saving more in a 401(k) gonna be more important than ever?

Jason Fichtner: So I think it’s important to think about, like, I love metaphors. They’re not always good, but they’re good, useful devices to walk through something. And the traditional one for retirement has been the three-legged stool, ’cause this three-legged stool is sturdy. And if you think about that for retirement, it used to consist of Social Security as one leg, your defined benefit pension plan as a second, and savings from personal savings as a third.

 Well, Social Security, of course, now is a little wobbly. The defined benefit pension system, me, is basically no longer unless you’re a government worker, and that’s now the defined contribution plan. So that leg [00:09:00] is gonna have to support a lot more of people’s retirement security.

So that includes access to 401(k) plan, saving more, but also turning that 401(k) asset into sort of like a personal pension, into a retirement paycheck. So think about how you get the best of a DC plan. That’s access to a market, so you basically have a lot of people now who are 401(k) millionaires. A lot aren’t, but a lot are.

That access to market is fantastic. Now you’ve gotta get more people up into that category and then say, “Now that you have that money, how do we convert that and make it like a pension plan for you that’s guaranteed and protected on top of Social Security?” As you think about Social Security reform or solvency, sitting down with a financial professional to say, “How much am I expecting from Social Security?

How much do I need to make up that gap for my spending needs? And my 401(k) turning it into protected income,” I think is how we start thinking about the, the larger role that 401(k) plans are gonna play in retirement security on a protected income basis.

Brian Anderson: Right. Okay. So you’ve just kinda talked about this a little [00:10:00] bit, but, in your opinion, does Social Security’s uncertain outlook strengthen the case?

It must strengthen the case for adding retirement income solutions in defined contribution plans.

Jason Fichtner: Yeah, it definitely does. Yeah, and I, and I think this is one where I’ve always believed that the 401(k) model was designed to augment, your retirement security in the first place, so it’s always been part of the conversation, but now it’s being highlighted more because I think people are now seeing the need.

Social Security, on average, was designed to replace about 40% of your income in retirement. It was never supposed to be 100% for all people, about 40%. And if you had a pension and you had some Social Security, you kinda made up that 70% to 80% that financial professionals say you should have in retirement.

So now the conversation is you still need to have that 70% or 80%. If Social Security is giving you 40, where does the extra 30 or 40 come from? That’s gotta come from your defined contribution plan. How do you take some of those assets? Doesn’t need all of them. How do you take some of them and create additional protected income on top of Social Security, so you have that guaranteed income stream you’ll need in retirement?

So it does put more emphasis [00:11:00] on the importance of your defined contribution plan, the role that’ll play, and how to help convert some of that into protected income.

Brian Anderson: Well, before we wrap up, I’d like to get your take on another topic, and that’s, that’s what we might expect to see from future retirement legislation.

There’s been a lot of talk about a potential Secure 3.0 bill taking shape in Congress, potentially as soon as 2028. What do you think are the prospects for this actually happening? And if it does, what do you think will be some of the policy priorities that Secure 3.0 would need to address?

Jason Fichtner: So this is a great question to end on, and one that’s, I think a more happy note to end on because the one area in which Congress has been able to do bipartisan legislation is retirement issues.

So they passed the SECURE Act in twenty nineteen, SECURE 2.0 was twenty twenty-two. That is more retirement legislation th- than we had in the previous ten years. So there’s a lot going on here. So the SECURE 3.0 can fill in some of the blanks that still weren’t filled by SECURE one and SECURE two.[00:12:00]

But keep in mind that a lot of plan administrators, private sector, they’re still working through how to operationalize the legislation and policies that were in SECURE one and SECURE two. So they’re kinda asking for some time to get those things implemented before, like, rushing into three. But I think a SECURE 3.0, if that’s what it’s gonna be called, is actually very likely because I think we’re gonna see a lot more to help people get access to employer-sponsored plans, some collaboration to allow for more automatic enrollment for people, maybe more portability.

When you move jobs, you can take one plan to another a lot easier. Multiple, you know, employer plans let small businesses come together to make a plan together. And then reduce additional barriers that people might see or employers might see to having annuities and protected income in their defined contribution plans.

So I think there are gonna be some policies along that line, and the key is gonna be to have legislators reach out to, you know, employers and plan sponsors and financial professionals and say, “Look, what is reality? What is perspective? What do we need to [00:13:00] fix to make these things happen?” Versus just doing legislation to legislation.

And I think because this is an area that Congress is working in a bipartisan basis, and there’s a lot of support and agreement on what needs to be done, that something on SECURE like SECURE 3.0 will happen in the next two years.

Brian Anderson: Excellent. That’s great to hear. I know I’m very hopeful that they are gonna get together on a SECURE 3.0.

I do think that’s probably what it’ll be called, as Brian Graff at ARA was saying, it’s a brand name now, so

Jason Fichtner: Yep, that’s exactly it. Whether they like it or not, it is.

Brian Anderson: Exactly. All right. All right, well, Dr. Jason Fichtner, thanks for joining us today and giving us a handle on what’s happening with Social Security’s finances and checking in on what we might expect to see from future retirement policy-making efforts.

really appreciate you sharing your insights with our audience, and thanks everyone for listening in to another edition of the 401(k) Specialist podcast.

Jason Fichtner: Thanks for having me on. It was a pleasure.