Should You Build a Social Security Bridge?

This month, the Bipartisan Policy Center released “Hedging the Risk of a Longer-than-Expected Life—The Value of a Social Security Bridge Strategy” authored by Emerson Sprick. Among the report’s key findings, Mr. Sprick says,

“A well-designed bridge strategy can significantly enhance retirement security and improve retirees’ financial well-being.”

This post will discuss the automatic Social Security bridge strategy built into the Actuarial Financial Planner (AFP) models to see how significantly this strategy may enhance one’s retirement security. See our post of April 15, 2020 for more discussion of delaying claiming of Social Security benefits. We hope that this post will help retirees make better financial decisions regarding the timing of their Social Security benefit commencement.

Use the Actuarial Financial Planner and Actuarial Process to Successfully Implement a Coast-Fire Strategy

 In his June 25, 2025 Kitces.com post, Adam Van Deusen encouraged financial advisors to help their clients understand when they may have enough retirement savings to “Coast-Fire” and keep working without necessarily saving more. The present value calculations required to implement this strategy are relatively straight-forward, but financial advisors (and DIYers) would be wise to use a tool like the Actuarial Financial Planner to perform the required calculations and an actuarial valuation process to manage assets, spending liabilities and risks for clients (or households) who actually choose to Coast-Fire. 

Valuing Your Hard-to-Value Retirement Assets

As indicated in many of our prior posts, the key metric for managing your spending, assets and risks in retirement is your Funded Status--the present value of your assets divided by the present value of your spending liabilities. The greater this measure, the healthier your financial status, all things being equal. As discussed in our post of June 3, 2025, you may wish to consider increasing your spending once your Funded Status exceeds 120% and you probably should be increasing your spending once your Funded Status reaches about 150% if you wish to avoid leaving an unintended legacy at death.

Eliminating the Cap on Social Security’s Taxable Wage Base

In 2025, the maximum taxable wage for determining payroll tax (FICA tax) contributions to Social Security (OASDI) is $176,100. This is also the maximum taxable wage for 2025 for determining an individual’s lifetime benefit (primary insurance amount) payable from the system. Under current law, the “cap” is adjusted annually based on the increase in the national average wage index.

Eliminating the cap is perhaps the most popular solution suggested these days for solving most of the system’s short and long-term funding problems. Since it only affects relatively wealthy working Americans, it is a solution that tends to have wide support among lower-paid workers and retirees, consistent with the famous Russell B. Long quote from 1973, “Don’t tax you, don’t tax me, tax the fellow behind the tree.” In this post, we will take a quick look at the pros and cons of eliminating the cap on Social Security’s taxable wage base.

Actuaries Live for Mortality

In this weekend’s Kitces.com Weekend Reading for Financial Planners (July 5-6), Adam Van Deusen discusses three articles concerning the importance of selecting reasonable lifetime planning period assumptions when decumulation planning, as well as stress-testing these assumptions when measuring longevity and mortality risks. He says,

“Ultimately, the key point is that creating a plan based on how long a client will live is most effective when both mortality and longevity risk factors are considered. Actuarial science offers tools that can help advisors assess these considerations so that they can adjust mortality assumptions and longevity expectations as part of an ongoing process of monitoring and updating a plan. And by making these adjustments collaboratively and regularly, advisors can help clients develop a relevant and realistic strategy to manage their mortality and longevity risks as they journey into retirement!”

We totally agree with Mr. Van Deusen, and in this post, we will highlight the mortality/longevity related actuarial tools in our “Actuarial Approach” website that can be of value to advisors and their clients.

Should Your Plan Anticipate Future Social Security Benefit Cuts?

In light of the recent release of the 2025 OASDI Trustees Report, there has been considerable news concerning Social Security’s financial status and the possibility that if Congress does not act prior to the projected exhaustion of the trust fund (2033 for OASI and 2034 for OASDI), benefits may effectively be reduced in the first full year of trust fund exhaustion by about 20% (for OASDI) or about 23% (for OASI). Reductions could increase in subsequent years absent any action by Congress. 

NASI Fumbles Facts Regarding Primary Cause of Social Security’s Funded Status Deterioration

This month, the National Academy of Social Insurance (NASI) released “Social Security at 90: Policy Options for Strengthening the Program’s Finances and Avoiding Automatic Benefit Cuts.” In their report, NASI examines “lessons from Social Security’s history that can help inform a potential path forward.” With respect to the causes of system’s current long-term financing problem, the report concludes:

“Much of the program’s long-term shortfall stems from the legacy costs of paying benefits to early generations of recipients after the program’s inception. More recently, the further deterioration in Social Security’s financial outlook since 1983 is largely due to the rise in earnings inequality that has eroded the program’s tax base, along with a failure to adjust tax rates in recent decades.”

In this post, we will disagree with NASI’s conclusions with respect to the primary cause(s) of the system’s long-range funded status deterioration and several other suggestions they make. This is a subject that we have written about extensively in the past, and one which we feel compelled respond to by “substituting facts for appearances” (part of the actuarial profession’s motto).

Long-Range Social Security Financing—It’s Worse Than We Predicted

In our post of February 15, 2025, we estimated Social Security’s financial status as of January 1, 2025 using:

• results from the 2024 OASDI Trustees report,
• an estimate from the Congressional Budget Office (CBO) of the effect of passage of the Social Security Fairness Act,
• our estimate of the effect of the annual actuarial loss to the system resulting from the change in the 75-year projection period, and
• no other changes in assumptions, system provisions or methods

Last February, we estimated that Social Security’s long-range actuarial balance as of January 1, 2025 would be -3.65% of present value of taxable payrolls for the next 75 years (down from -3.50% last year), or a Funded Status (PV of Assets/PV of Liabilities for the next 75 years) of 79.1% (down from 79.8% last year).  Our estimates turned out to be optimistic.

Kitces.com Suggests Advisors Include an Actuarial Approach in their Consulting Toolbelt

In its Weekend Reading for Financial Planners (June 7-8), Kitces.com and Adam Van Deusen included a link to and summary of our April 28, 2025 Advisor Perspectives article, “Advising a Retired Client Who Wants to Buy a Second Home (or Other Big-Ticket Item)”. Mr. Van Deusen did an excellent job summarizing the article and pointing out the benefits of using the Actuarial Approach and its Funding Status metric to measure and communicate the impact of a client’s financial decisions on the sustainability of their plan.

In his summary, Mr. Van Deusen says,

“In sum, financial advisors have more than one tool in their toolbelt when it comes to analyzing the impact of large purchases by their retired clients. And while advisors might not consider themselves to be actuaries, taking an actuarial approach could provide clients with a metric that allows clients to better understand the impact of potential purchases on the sustainability of their financial plan!”

Of course, we like to think that the Actuarial Approach advocated in this website and its Funded Status metric can easily be applied more broadly to all significant financial decisions in retirement, not just potential purchases. We strongly agree with Mr. Van Deusen that the Actuarial Approach would be a good tool to add to the toolbelt of a financial advisor, and we are happy to assist financial advisors who may have questions about the Actuarial Financial Planner Excel workbooks or the Actuarial Approach discussed in our website.

Funded Status—The Better Metric for Managing Assets and Spending in Retirement

As we have indicated many times in prior posts, the future isn’t going to happen as you (or your financial advisor) assume, and your spending goals and actual spending are likely to change over time. Therefore, your retirement plan should include a process for determining when future adjustments to your plan may be necessary. We believe such a process is much more important than any model you may use to project the future.