Social Security Is in Trouble—for Real. When to Claim Your Benefits.

Many Americans worry about the future of Social Security, and rightly so. But that’s not a good reason to claim your benefits early.

The long-term outlook of the program isn’t any better than it was a year ago, according to an annual report released by the Social Security Trustees. They projected that the retirement trust fund would run dry in 2033, the same forecast as last year. Once the fund’s reserves become depleted, incoming payroll taxes will be sufficient to cover 79% of promised benefits, up from 77% last year.

Strong employment, and the resulting payroll taxes, have helped the outlook hold steady. But that’s small comfort in the long run, and it won’t likely change the minds of those who plan to claim early because they fear for the program’s future. Some 44% of nonretired Americans said they worry Social Security would run out of money, and only 10% of those eligible planned to wait until their maximum benefit age of 70 to claim, according to a poll last year by investment firm Schroders.

Many people simply want what’s theirs before the money might run out. After a career of paying Social Security taxes, it’s understandable. But it’s based on the fear that Social Security is going broke. It’s not. Instead, the program faces insolvency; that may be more of a government accounting problem, and there are many ways to fix it.

If Congress doesn’t act by 2033, the retirement trust fund will run dry and Social Security won’t have enough money to pay out what it owes. Most experts predict lawmakers will act to avert the catastrophe. And even if it came about, payroll taxes will continue to flow through the spigot, funding 79% of promised benefits.

A 21% benefit cut would be devastating. But the math still favors waiting to claim full benefits. If you wait to claim, any cut would be applied to a higher monthly check compared with those who claim at their earliest eligibility.

Someone who claims at 62, for instance, will lock in lifetime benefits that are 30% less than what they’d get at their full retirement age of 67. If they can hold off until 70 to claim, they’ll receive 124% of what they’d get at 67.

There’s a clear payoff to delaying as long as possible, with financial benefits that are better than any annuity you could buy on the market. And many Americans understand that. In the Schroders survey, 72% of respondents said they knew they would receive higher payments by waiting but still chose to start getting their checks earlier.

Some advisors say worries about Social Security’s solvency are misguided.

“You should be more concerned about the taxes you’ll pay than the fiscal health of Social Security,” says Charles Czajka, a certified Social Security claiming strategist and founder of Macro Money Concepts in Stuart, Fla. He plans to claim at 70.

What if you simply need the money? One solution, Czajka says, is to withdraw money from tax-deferred retirement accounts before the Internal Revenue Service requires you to do so at age 73. That will lower your required minimum distributions and the resulting tax bill. It also gives you money for living expenses while allowing your Social Security benefits to grow.

Many people may not have that luxury, of course, and haven’t been able to save enough to tide them over until 70. Others have a prognosis that limits their life expectancy, and that may well be a good reason to claim benefits early. (Note: that’s different from assuming how long you’ll live—surveys have consistently shown that people underestimate their possible longevity.)

Others try to game the system by figuring out when they’ll come out ahead by waiting and collecting fewer bigger payments versus claiming earlier and collecting more smaller payments. For most people, the break-even age is somewhere in the late 70s to early 80s.

Most experts advise focusing on longevity protection —or protection against running out of money in old age—instead of trying to time your benefits. The biggest protection comes from the biggest paycheck, but it’s not an all-or-nothing proposition: Every month you wait to claim adds more money to your check.