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NewsMaterial4 min readDisconfirmAI Editorial

Nick Maggiulli, Personal Finance Data Blogger: Social Security Benefits Will Not Drop to Zero After Trust Fund Depletion; Advises Planning with 70% of Estimated Amount

Nick Maggiulli, author of Of Dollars and Data, explains based on the 2026 U.S. Social Security Trustees Report that even if the OASI trust fund is depleted in 2032, payroll taxes will still cover approximately 78% of scheduled benefits. He advises retirees to multiply the Social Security Administration's estimated monthly benefit by 0.7 as a planning assumption and explains the logic behind this ratio.

2026-10-27 19:45 GMT+8

If you are in your 20s, 30s, or 40s, there is a high probability you have heard since childhood that the U.S. Social Security system is going bankrupt. The 2026 U.S. Social Security Trustees Report indeed predicts that the Old-Age and Survivors Insurance (OASI) trust fund, which pays retirement and survivor benefits, will be depleted by 2032. However, Nick Maggiulli, author of Of Dollars and Data, points out that trust fund depletion does not mean benefits drop to zero. Social Security payments come from two sources: payroll taxes from current workers and the trust fund itself. Once the fund is exhausted, the system cannot borrow money and can only pay what payroll taxes cover. According to the Trustees Report estimates, in the first year after 2032, benefits will drop to 78% of scheduled amounts. The average monthly Social Security benefit in the United States is currently about $2,000; 78% means about $1,560—indeed a reduction, but far from nothing.

Maggiulli further explains why this number will continue to decline over time. As the ratio of the working population to the retired population continues to worsen, the proportion of benefits covered by payroll taxes will also decrease year by year. By 2100, the Trustees Report estimates the payment ratio will drop to 62% of scheduled benefits. He admits no one knows exactly how things will develop in reality, but this is the direction indicated by the mathematics.

With the premise understood that benefits will decrease but not disappear, Maggiulli shifts the question from whether Social Security will exist to how much you can actually count on. His core recommendation is a simple planning method: log into the U.S. Social Security Administration’s my Social Security account, view the system’s estimated monthly retirement benefit, and then multiply it by 0.7. If the system shows $3,000 per month, your planning assumption would be $2,100.

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Why 0.7 instead of 0.78? Maggiulli believes Congress is likely to take action—either raising taxes or cutting benefits—to mitigate the worst-case scenario, but the likelihood of completely solving the deficit is not high. 70% is his compromise estimate combining both scenarios. He cites a 2025 survey by the National Academy of Social Insurance: 85% of respondents believed benefits should be maintained or increased, even if it meant raising taxes on some or all Americans. Among the repair options listed by the Social Security Administration, the only option that could eliminate the entire deficit on its own was raising the payroll tax rate from 12.4% to 16.4%. Based on this public opinion foundation and the structure of the proposals, Maggiulli leans toward believing the final outcome will involve tax increases rather than significant benefit cuts, making 70% more conservative than 78% but more realistic than complete disappearance.

Maggiulli also explained the specific calculation method for Social Security benefits, as many people mistakenly believe it works like a pension where working longer yields more. In fact, the calculation involves three steps: First, adjust your annual income to an indexed level based on national wage growth; second, take the highest 35 years of indexed income and divide by 420 months to get the Average Indexed Monthly Earnings (AIME); third, use the Social Security Administration’s bend point formula to calculate benefits. For someone turning 62 in 2026, the bend points are: 90% of the first $1,286 of AIME, 32% of the amount between $1,286 and $7,749, and 15% of the amount exceeding $7,749. This means lower-income earners receive a higher replacement rate, while higher-income earners receive a lower proportion.

He gave a specific example: If the AIME is $5,000, the monthly benefit at full retirement age (67) would be $2,345, which is 46.9% of the AIME. If claimed early at age 62, it would be reduced by about 30%; if delayed until age 70, it would increase by about 24%. The maximum monthly benefit in 2026 is $5,181, applicable to those who earned at or above the taxable limit for more than 35 consecutive years and waited until age 70 to retire.

Maggiulli clearly marked the boundaries of these assumptions. He said, 'I certainly made many assumptions. In reality, nothing is guaranteed. Congress could pass legislation tomorrow to completely eliminate Social Security, or next year they could raid the trust fund. They could do many extreme things, but I don’t think they will.' He simultaneously disclosed that he is the Chief Data Officer at Ritholtz Wealth Management, a website that provides financial advice services.

His final judgment is: Do not base your retirement plan entirely on Social Security checks, but assuming they won't be there is a bigger mistake. For the average person retiring in 2032, 70% means about $1,400/month; if you retire later, because wages typically grow faster than prices, the AIME will exceed current levels, and the actual amount may be higher.

Sources

  • ofdollarsanddata.comOf Dollars And Data↗
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