Starting January 1,2026 and ending May 31,2026, a record 1.8 million Social Security applications were submitted to the Social Security Administration (SSA). The 1.8 million applications represent an increase of 18 percent for the same time period during 2025. Among the reasons for the surge in applications is fear and uncertainty concerning the future of Social Security among many Americans. To make matters worse, since the start of the second Trump Administration in January 2025, the SSA has cut 7,000 employees, decreasing employment at the SSA to 50,000 employees. Call waiting times at the SSA have also increased since the start of 2026, with callers waiting on average two hours for their call to be answered.
The Social Security trust funds are now projected to be depleted within eight years – 2033 for the Old-Age and Survivors Insurance (OASI) trust fund and 2034 for the Old Age Survivors and Disability Insurance (OASDI) trust fund. It should be noted that in the past, projections of the insolvency of the Social Security trust funds in the distant future resulted in gradual policy discussion and delayed actions. But in 2026, that once distant future no longer feels abstract. The climate of unease with respect to the Social Security trust fund has resulted in a range of proposals as to how to fix the program’s funding gap. Among the proposals are raising the full retirement age (currently age 67) to age 69, increasing the Federal Insurance Contribution Act (FICA) payroll tax (currently 6.2 percent) which deducted from an employee’s paycheck and matched by the employer, doing away with the Social Security maximum wage base (currently $184,500) and the family “six-figure-limit” ($50, 000 for families in which one family member is receiving a monthly benefit and $100,000 in which more than one family member is receiving a monthly benefit). There is also discussion whether limiting Social Security benefits for higher-income earners, especially those retirees with guaranteed pensions (defined benefit plans such as a CSRS annuity, a FERS annuity or military retirement pay), can help the program’s funding challenges.
Looking back to the early 1980’s when the Social Security trust funds were also nearing insolvency, a similar situation existed. At that time, without Congressional action Social Security benefits would have been reduced. Congress did act by enacting a mix of payroll tax hikes, benefit changes and a gradual rise of the full retirement age from age 65 to age 67 in order to ensure Social Security solvency.
However, the current fiscal environment presents more challenges. Lower birth rates and longer life expectancies are increasing the ratio of beneficiaries to workers. An increasing share of wages including net income from self-employment now exceed the taxable Social Security wage base. Earlier projections assumed that approximately 90 percent of wages would be subject to FICA taxes. In 2026, that figure is closer to 83 percent.
An aging population has resulted in the Social Security Administration disbursing more benefits than it collects in payroll taxes. Current projections indicate that the Social Security retirement and disability trust funds will run out by 2034 if no Congressional action is taken. Under current law, if the trust funds are exhausted, Social Security benefits will automatically be reduced to match incoming revenue. This means that all beneficiaries will see an automatic reduction in their monthly benefits. The longer Congress delays taking action, the fewer opportunities Congress will have to implement gradual changes, increasing the likelihood that more immediate adjustments will be needed.
For federal employees and retirees, the uncertainty of the timing and structure of Social Security reform raises an important question. How should employee and retiree planning decisions adapt with respect to their Social Security retirement benefits? The answer to this question depends in part on the working status of an employee, namely: (1) Still working and many years away from retirement; (2) Approaching retirement; or (3) Already retired. Each stage is discussed.
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For Those Employees Still Working and Many Years Away from Retirement
For federal employees who are at least 20 years away from retirement, the focus should be on building flexibility and minimizing dependence on any one source of retirement income. Planning assumptions may need to be revised to account for a later FRA, later than the current FRA of 67. There also may need to be modifications to the Social Security retirement benefit formulae or benefits lower than current estimates. This emphasizes the importance of increased personal savings for retirement and diversifying future retirement income sources.
Federal employees are advised to increase their annual TSP contributions, ideally maximizing their contributions each year. Contributing to any type of IRA (traditional IRA) each year while they are working is also advised. Maximizing both Roth TSP and Roth IRA savings is especially important because the Roth TSP and Roth IRA can give greater control over taxable income in retirement.
All employees are encouraged to enroll in high- deductible health plans (HDHP) offered through the Federal Employee Health Benefits (FEHB) program and contribute to a Health Savings Account (HSA) associated with the HDHP. An HSA provides triple savings as follows: (1) Contributions to an HSA are fully tax deductible; (2) An HSA accrues earnings (interest, dividends and capital gains); and (3) HSA distributions are income tax-free if used to make or reimburse qualified medical, dental and vision expenses. Among the qualified HSA withdrawals are to reimburse HSA owners for Medicare Part B and Medicare Part D monthly premiums. This is significant because the majority of Medicare beneficiaries have their Medicare Part B and Medicare Part D monthly premiums deducted from their monthly Social Security check. The result is that the Social Security beneficiary is able to retain more of their Social Security retirement benefits to supplement their other retirement income.
Diversifying retirement income sources is another key factor. Retirement savings plans that rely on Social Security as a primary retirement income are more vulnerable to legislative policy risk than those retirement plans which are supported by multiple income streams.
Other planning decisions that can help to enhance long-term flexible retirement income include paying down or eliminating long-term debt before retirement. In particular, mortgage debt. Another suggestion is delaying retirement. Delaying retirement by one or two years while continuing to maximize retirement saving can permanently increase a FERS employee’s FERS annuity by a minimum 2 to 3 percent. It may also reduce the number of years the TSP needs to provide income.
For Those Employees Getting Close to Retirement and Those Already Retired
Those employees who are nearing retirement; that is, they are in their late 50’s and early 60’s, or who are already collecting Social Security benefits are also advised to focus on maximizing their retirement income.
Current retirees who are collecting a monthly Social Security retirement benefit are usually less affected by direct benefit cuts. This is because most Social Security reform proposals avoid cutting benefits to existing Social Security beneficiaries. But that does not remove the importance of planning. Changes in federal and state taxes, healthcare costs and increasing cost-of-living can impact overall retirement income.
Effectively managing income withdrawals from the TSP and IRAs and brokerage accounts becomes increasingly important. Coordination withdrawals from taxable, tax-deferred and tax-free accounts can help control income and possibly reduce taxes.
Healthcare planning, including planning for possible long-term care, remains a vital aspect of retirement. Regular reviewing healthcare coverage, including FEHB program health insurance and Medicare, and long-term care insurance can help control expenses and prevent unnecessary surprises.
While the specific details of future Social Security reform remain uncertain, the overall direction of the discussion as to how to fix Social Security becomes clearer. The need for thoughtful and proactive planning is greater than ever as the insolvency deadline gets closer. The question that both current employees and retirees have to ask themselves when changes come to Social Security is: How prepared will they be when these changes are implemented? Will they have saved enough from various sources to fill in any income gaps resulting from Social Security benefits cuts?
Moreover, federal employees and retirees are to be reminded that Social Security was never intended to be a sole retirement system. Social Security was established in 1935 to be a supplement to a working individual’s regular savings for their retirement years. Regular savings include defined contribution plans (such as the TSP), IRAs, brokerage accounts (for accumulating diversified long-term investments such as stocks, bonds, open-end and closed-end funds, ETFs) and savings accounts (to accumulate a sufficient of liquid assets). Federal retirees are also reminded that they are fortunate enough to have a guaranteed pension in the form of a CSRS annuity or a FERS annuity. Having a substantial amount of retirement savings and a guaranteed pension means that a federal retiree will be better prepared to weather any financial crises resulting from the possible insolvency of the Social Security trust funds.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. 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.
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Ed Zurndorfer, EA, ATA, CFP®, CLU®, ChFC®, CEBS®, ChFEBC℠: Federal Employee Benefits Expert
A former career Federal employee, Ed has published a staggering 1,200+ separate articles on Federal Benefits and Retirement!
Just “Google” his name, and you are likely to find a plethora of sites that contain his writings. Drawn to its mission to reach, teach
and serve Feds, Serving Those Who Serve is the only financial planning practice with which Ed has chosen to affiliate in over
20 years teaching. In addition to conducting Federal Benefits seminars for Serving Those Who Serve, you can find Ed’s
writings here on our blog in the FedZone, and on Fed-Soup, MyFederalRetirement, FederalNews Radio and NITP.
He is a member of the Maryland Society of Accountants, the National Association of Enrolled Agents, the International Society of Certified Employee Benefits Specialists, the Financial Planning Association, the National Association of Health Underwriters,
and the Society of Financial Service Professionals. Since 1999, Ed has taught many thousands of Federal employees about
their benefits, in person and at Federal agencies all over the country. Ed is a true national treasure.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. 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.