Social Security and Medicare “benefit cliffs” are making headlines again, and the timelines haven’t improved. The projected fund depletion dates are enough to rattle anyone trying to plan for retirement, but for federal employees, the reality may be a bit less concerning.
Here’s what you need to know about the prediction for Social Security solvency in 2034 and its impact on federal employees.
The Current Outlook
The 2025 Social Security Trustees’ report projects that without legislative action, combined trust fund reserves will run short in 2034. If that happens, roughly 80% of scheduled Social Security benefits could still be paid from ongoing payroll tax revenue. This shortfall is a concern that requires attention, but it’s not an immediate crisis.
Similarly, Medicare’s Part A (hospital insurance) fund faces depletion in 2033 based on current projections. Medicare Parts B and D are financed annually through premiums and general revenue, so they are not under the same pressure.
What This Means for Federal Workers
Since Social Security is a central part of most retirement plans, it’s smart to plan around the 2034 uncertainty, rather than assuming worst-case scenarios or banking on a legislative fix. However, Feds can also take some comfort in knowing that there is no similar trust fund cliff for your pension.
Federal pensions under the Federal Employees Retirement System (FERS) and Civil Service Retirement System (CSRS) are paid from the Civil Service Retirement and Disability Fund (CSRDF), which is backed by the U.S. Treasury and subject to annual review. So while policy risk may be a concern over decades, there is no announced depletion date.
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Consider These Planning Moves
While you can’t control policy outcomes, you can adjust your retirement plan to help ensure it’s optimized for a variety of scenarios. Here are a few moves to consider:
- Build an income floor: Cover your essential expenses with your most stable income: FERS or CSRS pension and Social Security (at your chosen claim age). Pair this with a prudent G or F fund or a cash buffer.
- Stress-test your benefits: Model a temporary 10-20% Social Security reduction or delayed cost of living adjustment (COLA), and pre-decide on small spending cuts, such as adjusting travel or vehicle purchases, to help keep the plan on track.
- Sequence your withdrawals: Keep six to 24 months of planned draws in cash or bonds to avoid selling equities during times of volatility.
- Pay attention to tax hygiene: Make adjustments to help smooth your income across brackets year to year, and consider how large withdrawals or Roth conversions may affect your Medicare income-related monthly adjustment amount (IRMAA). Don’t forget, there is a two-year lookback period.
- Set rebalancing rules: Use allocation bands or an L-Fund to help enforce disciplined investing, regardless of what the headlines say.
- Factor in Medicare pressures: Start Medicare trust fund 2033 planning now by adjusting budget projections to factor in possible cuts to hospital coverage and annual Part B and Part D adjustments.
Now Is the Time for Planning, Not Panic
Solvency headlines deserve attention, not alarm. With a solid income floor, stress-tested assumptions, and disciplined rebalancing, you can reposition your retirement plan to absorb policy shifts. Build flexibility into your strategy and stay focused on the things you can control.
For help adjusting or testing your plan, reach out to the team at Serving Those Who Serve at [email protected].
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
