Social Security Tips, Tricks, and the 2034 Funding Cliff: What You Need to Know

Social Security is a cornerstone of retirement planning in the United States, providing vital income to over 66 million Americans. Whether you're nearing retirement or just starting your career, understanding how to maximize your Social Security benefits is crucial. However, looming over the future of the program is a sobering fact: without reforms, Social Security's trust fund is projected to run dry by 2034. Here's what that means—and what you can do now to make the most of your benefits.

Understanding How Social Security Works

Social Security is funded primarily through payroll taxes under the Federal Insurance Contributions Act (FICA). Workers and employers each contribute 6.2% of wages, up to a wage cap that adjusts annually (in 2025, it's $168,600). These taxes go into two trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund.

Retirees receive monthly benefits based on their 35 highest-earning years. The longer you work and the more you earn (up to the wage cap), the higher your benefit.

Why Social Security May "Run Out" by 2034

Every year, the Social Security Trustees issue a report on the financial health of the trust funds. According to the 2024 Trustees Report, the OASI fund is projected to become insolvent by 2034. That doesn’t mean Social Security will disappear—but unless Congress acts, it means the program would only be able to pay out around 77–80% of scheduled benefits based on incoming payroll taxes.

Several factors contribute to the projected shortfall:

1. Aging population – Baby Boomers are retiring, increasing the number of beneficiaries.

2. Lower birth rates – Fewer workers are entering the labor force to pay into the system.

3. Longer life expectancy – People are living longer, thus drawing benefits for more years.

4. Wage stagnation and income inequality – A disproportionate share of income is above the taxable wage cap.

Tips and Tricks to Maximize Your Social Security Benefits

With potential benefit reductions on the horizon, it's more important than ever to plan strategically. Here are some ways to make the most of your Social Security benefits:

1. Delay Claiming If You Can

You can start receiving benefits as early as age 62, but you'll receive reduced payments. If you wait until your full retirement age (FRA)—which ranges from 66 to 67 depending on your birth year—you’ll receive 100% of your benefit.

Even better, for every year you delay beyond your FRA (up to age 70), your benefit increases by about 8% annually. For example, someone whose FRA is 67 and delays until 70 could boost their monthly benefit by 24%.

2. Work for at Least 35 Years

Social Security calculates your benefit using your highest 35 years of earnings. If you don’t work 35 years, the missing years are filled in with zeroes, which drags down your average.

If you're short of 35 years, even part-time work in your later years can replace those zeroes and increase your benefit.

3. Understand the Spousal and Survivor Benefits

If you're married, divorced, or widowed, you may be eligible for spousal or survivor benefits:

• Spousal benefits: You can receive up to 50% of your spouse’s full benefit if it’s more than your own.

• Divorced spousal benefits: If you were married for at least 10 years and are currently unmarried, you can claim based on your ex-spouse’s record.

• Survivor benefits: Widows and widowers can receive their deceased spouse’s benefit if it’s higher than their own.

Strategically coordinating claiming decisions between spouses can significantly boost your household’s total lifetime benefits.

4. Be Wary of the Earnings Test

If you claim benefits before your full retirement age and continue working, your benefits may be reduced if your income exceeds certain limits. In 2025, the earnings limit is $22,320. For every $2 you earn over the limit, $1 is withheld.

However, once you reach full retirement age, Social Security recalculates your benefits to account for previously withheld amounts, and the earnings test no longer applies.

5. Minimize Taxes on Your Benefits

Up to 85% of your Social Security benefits may be taxable depending on your "combined income" (adjusted gross income + non-taxable interest + 50% of your Social Security benefits).

Strategies to reduce taxes include:

• Withdrawing from Roth IRAs instead of traditional retirement accounts

• Spreading out retirement account withdrawals

• Managing capital gains and other taxable income sources

6. Consider Longevity and Health

Claiming early may seem tempting, especially if you have health concerns or a shorter life expectancy. However, if you live into your 80s or 90s, delaying benefits can pay off significantly. It’s a personal decision, but one that should factor in your health history and family longevity.

Can Social Security Be Fixed Before 2034?

There is still time for lawmakers to shore up Social Security’s finances. Proposed solutions include:

• Raising or eliminating the payroll tax cap

• Increasing the payroll tax rate

• Gradually raising the full retirement age

• Changing how benefits are calculated (e.g., lowering benefits for higher earners)

• Using general tax revenue to supplement the trust fund

While politically challenging, a combination of these reforms could restore long-term solvency.

Common Pitfalls to Avoid

1. Waiting Until You "Make More Money"

Many people believe they’ll start saving once they get that next raise. But higher income often leads to higher spending — a phenomenon known as lifestyle inflation. Start saving now, even if it’s a small percentage.

2. Not Adjusting Over Time

Your savings rate shouldn’t be static. As you pay off debt, get raises, or your living situation changes, increase your savings accordingly.

3. Ignoring Employer Benefits

Employer-sponsored retirement plans, Health Savings Accounts (HSAs), and Employee Stock Purchase Plans (ESPPs) are powerful saving tools that often come with tax advantages and free money through matches.

Final Thoughts

Social Security remains one of the most reliable sources of retirement income in the U.S., but it's facing a future funding crisis. While the program won’t disappear entirely in 2034, benefits could be reduced unless action is taken.

The good news? By understanding the system and making smart decisions about when and how to claim, you can help secure your financial future regardless of what happens in Washington.

Plan early, stay informed, and prepare for the unexpected—your future self will thank you.