It sounds bleak. And when I talk with people who are getting close to retirement, they feel the same way.

It doesn’t help that headlines about Social Security “running out of money” have become more common. And, with congress approaching a funding deadline that is no longer decades away, it's understandable that people nearing retirement want to know what that means for them.

Our team went through the 273-page 2026 Social Security Trustees Report to get a clear picture of what is actually happening. And… the future of Social Security may not be quite as grim as the headlines suggest.

The short version is that Social Security is spending more than they are bringing in, and something needs to change. But I think there is an important part of the story that gets lost in the headlines.

Running out reserves is not the same thing as Social Security disappearing. Understanding this distinction matters, especially for retirees tempted to make decisions out of fear rather than what’s best for their financial plan.  

The Real Issue: Social Security’s Trust Fund

Quick background on Social Security, it is primarily a pay-as-you-go system. Payroll taxes collected from today’s workers and their employers are funneled to pay benefits to today’s retirees.

For much of Social Security’s history the taxes collected amounted to more than it needed to pay current benefits and that surplus of dollars accumulated in the current trust funds. However, today, the opposite is happening. Benefits and other program costs are greater than the revenue coming in, so Social Security is using those reserves to cover the difference.

The issue comes from a demographic imbalance. Baby boomers are retiring, which leaves fewer workers to support each Social Security beneficiary. This creates a pretty straightforward math problem: benefits are growing faster than the payroll tax revenue available to support them.

Since 2021, Social Security’s total costs have surpassed its total income, requiring the program to draw down its reserves. With the current projections, the OASI trust fund, that pays retirement and survivor benefits, is expected to exhaust those reserves in 2032.

While this sounds alarming, it doesn't mean Social Security will vanish.

What Happens in 2032?

The common misconception is that the depletion of the trust fund means Social Security will go bankrupt and cease to exist.

The Social Security trust fund that pays retirement and survivor benefits is projected to run out of its reserves in the fourth quarter of 2032. If Congress makes no changes before then, the programs income would be enough to pay approximately 78% of scheduled retirement and survivor benefits ([1] pg.5).

This doesn’t mean Social Security benefits suddenly stop when the trust fund is depleted. Workers would still be paying Social Security taxes, and these taxes would continue to provide a significant portion of benefits.

I also don’t want to downplay what a potential 22% would mean for retirees. For someone expecting $4,000 per month from Social Security, a 22% reduction would mean $880 less each month, or more than $10,000 per year. This is considerable difference for someone counting on this income.

This is why I have a hard time with either extreme. Saying Social Security is “going bankrupt” overstates the problem but saying there is nothing to worry about understates it.

Congress Has Options, but None Are Painless

The Social Security administration has given congress several ways to improve Social Security’s finances. Here are some potential strategies:

1. Increase Social Security Payroll Tax – Today, employees pay 6.2% of wages into Social Security, with employers contributing another 6.2%. If you’re self-employed, you’re generally responsible for both, 12.4%. Congress could increase those percentages which would help close the long-term funding gap, although it would mean higher taxes for workers and employers.

2. Increase the Social Security Wage Base – In 2026, Social Security taxes only apply to the first $184,500 of earned income. Anything above that amount is not subject to Social Security payroll taxes. Congress could raise the wage base limit, eliminating it all together, or begin taxing again above a higher income level. These approaches could generate additional revenue but at the cost of higher earners.

3. Adjust Future Benefits – Another option would be to change how Social Security is calculated. This can include changing the benefit formula, annual cost-of-living increases, or benefits paid out to higher-income retirees. These changes could improve Social Security’s finances, but future retirees would still receive less than they are currently expecting.

4. Increase Full Retirement Age (FRA) – For anyone born in 1960 or later, Full Retirement Age is currently 67. Congress could push that age higher. This might sound like a small change, but it would effectively reduce benefits for future recipients. Someone who wanted to retire at the same age would receive a smaller monthly check, or they'd need to wait longer to receive their full benefit.

   We've seen this before. Social Security's Full Retirement Age was originally 65, and legislation passed in 1983 gradually increased it to 67.

5. Invest in Equities – The SSA has proposals that would simulate a portion of the reserves to be invested in equities instead of solely in government securities. Higher expected returns could improve solvency, but investment changes alone would not eliminate the funding shortfall

If I had to guess, the eventual solution will be some combination of changes rather than one simple fix. The longer Congress waits, the harder it becomes to phase those changes in gradually, which is a reason the discussion is becoming more urgent.

Should the Funding Problem Change When You Claim Social Security?

This is where the policy discussion becomes much more personal.

For many retirees, deciding when to claim Social Security is one of the most pivotal decisions they will make around retirement. It can affect not only their own monthly income for life, but also a spouse’s survivor benefit, their tax situation, and how much they need to withdraw from their portfolio.

As an advisor I sometimes hear investors say, “I should take Social Security as soon as possible because I want to get my money before it runs out.” I understand the instinct: if future benefits might be reduced, why not start collecting now?

Whether to claim at 62, Full Retirement Age, or 70 should consider many factors including life expectancy, marital status, survivor benefits, taxes, other retirement income, portfolio withdrawals, and the value of securing a larger guaranteed lifetime benefit.

Claiming early permanently reduces your monthly benefit. While delaying can meaningfully increase it. Someone who claims early because they are worried about a future cut may be giving up a larger lifetime income stream to protect against a change that Congress may ultimately address in a very different way.

Social Security’s finances should absolutely be part of the conversation. They just should not be the only part of it.

Build a Plan That Doesn’t Depend on Predicting Congress

I have my guesses about how Congress might address this, but that’s all they are.

For those planning for retirement, rather than trying to predict the outcome, a better approach is to stress-test the retirement plan under different Social Security assumptions. Model the impact of receiving 100% of your projected benefit, then look at what happens if only 80% of that benefit is available beginning around 2032.

The goal here is not to predict a 20% cut, but rather to understand how dependent the plan is on Social Security and where it may be vulnerable. Does the plan still work if benefits are reduced? Can the portfolio provide enough additional income? Would spending need to change? Are there other reliable income sources? Does the claiming strategy still make sense under each scenario?

We use this same approach with other uncertainties like markets, inflation, taxes and longevity. A resilient plan does not require every assumption to be right. What it needs is to be built with enough flexibility and margin to remain successful when things don’t go as expected.

And I think Social Security should be treated the same way. It's an important source of retirement income for millions of Americans, but we don't know exactly what Congress will do or when they'll do it.

What we can do is understand how dependent your retirement plan is on Social Security, consider what happens if benefits change, and make decisions today that give you flexibility down the road.

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Disclosure:
This material is provided for informational and educational purposes only. It should not be construed as investment, legal, or tax advice, nor does it constitute a recommendation or solicitation to buy or sell any security. Investors should consult with a qualified financial professional before making any investment decisions. Rebalancing and asset allocation strategies do not ensure a profit or protect against loss in declining markets. There is no guarantee that any investment strategy will achieve its objectives. Any references to historical performance, academic studies, or research are based on past data and should not be considered indicative of future results. Past performance is not a guarantee of future outcomes. Advisory services offered through Human Investing, an SEC-registered investment adviser.

Sources

• [1] Social Security Administration. (2026). The 2026 OASDI Trustees Report. https://www.ssa.gov/oact/tr/2026/

• Social Security Administration, Office of the Chief Actuary. (n.d.). Old-Age, Survivors, and Disability Insurance Trust Funds, 1957–2025 [Data table]. https://www.ssa.gov/OACT/STATS/table4a3.html

• Social Security Administration, Office of the Chief Actuary. (2025). Summary of provisions that would change the Social Security program. https://www.ssa.gov/OACT/solvency/provisions/summary.pdf

• Social Security Administration. (2026). Contribution and benefit base. https://www.ssa.gov/oact/cola/cbb.html

• Springstead, G. R. (2011). Distributional effects of accelerating and extending the increase in the full retirement age (Policy Brief No. 2011-01). Social Security Administration. https://www.ssa.gov/policy/docs/policybriefs/pb2011-01.html) 

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If you had told me at the beginning of the year that the seven largest companies would underperform, inflation would remain stubborn, tariffs would add pressure to prices, another interest-rate hike would become a real possibility, and conflict would disrupt shipping through the Strait of Hormuz, I would have guessed the stock market would be down. 

That would have been a reasonable guess….it also would have been wrong. 

Through July, the S&P 500 has gained roughly 10% including dividends, despite an economic backdrop that seemed to hint otherwise. It’s a reminder that the future rarely unfolds exactly as we think it will. Markets have a way of surprising both optimists and pessimists.  

That brings us to one of the more interesting stories unfolding beneath the surface this year. 

A Different Kind of Market 

For the past several years, the story of the U.S. stock market was largely the story of seven companies: NVIDIA, Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla. Together, they are often referred to as the “Magnificent Seven,” or simply the “Mag 7.” 

In 2023, the Magnificent Seven gained approximately 76%, while the remaining 493 companies in the S&P 500 returned roughly 11%. In 2024, the Mag 7 gained another 48%, compared with approximately 14% for the rest of the index. 

Compounded over those two years, the Magnificent Seven appreciated roughly 160%, while the remaining 493 companies of the S&P 500 gained about 27%.

These returns were supported by business success. The companies delivered impressive earnings, benefited from the excitement surrounding artificial intelligence, and established themselves as leaders in some of the world’s most important industries. As a result, this relatively small group accounted for a significant share of the market’s gains.  

This year, something important has changed. The market has continued to move higher, but this time the gains have come from a much wider range of companies. Smaller companies generally have outperformed large companies, and international markets have outperformed large companies in the US. 

The market has continued to move forward, but it hasn’t needed the same seven companies to carry it. 

Why Broader Participation Matters 

A market supported by more companies is generally healthier than one carried by only a handful of names. Broader participation means the market is less dependent on the ongoing success of the same companies. 

One of the interesting realities of investing is that a great business doesn't always make a great investment. A company can continue growing while its stock underperforms simply because expectations have already become so high. 

The Magnificent Seven did not suddenly become seven bad businesses. They entered the year carrying high expectations, large positions within the index, and several years of extraordinary performance. Meanwhile, many other parts of the market entered the year with lower valuations and less enthusiasm. 

As investors began finding opportunities elsewhere, market leadership broadened. This shift is a normal part of how markets work. 

J.P. Morgan’s historical review of the ten largest companies in the S&P 500 shows how market leadership has changed across decades. The companies dominating the index in 1985 looked very different from those leading in 2005, 2015, or 2025. Some remained successful businesses for decades. Very few remained the market’s dominant investment leaders.   

The lesson is not that today’s largest companies are destined to fail. History simply gives us little reason to assume that the same group will lead forever. 

Seasons like this are where diversification proves its value 

When large technology companies lead the market for several years, it can begin to feel as though they are the only investments that matter. International stocks, smaller companies, and other parts of the market may receive far less attention. Then leadership quickly changes, often when few investors expect it. 

Diversification acknowledges that none of us knows exactly how the future will unfold. Rather than trying to predict the next winning sector, company, or country, it allows investors to participate in market growth as a whole. The result is a portfolio that is less dependent on any single outcome and better prepared for a range of possible futures. 

The Portfolio Serves the Plan

One of the reasons we spend so much time building a financial plan before building an investment portfolio is because the plan defines what success actually looks like. 

The portfolio then becomes a tool to support that plan. Its purpose may be: 

• To fund retirement. 

• To provide confidence that spending can continue through changing markets. 

• To create flexibility for opportunities that arise unexpectedly. 

• To support children and grandchildren. 

• To give generously. 

• To weather setbacks without having to abandon long-term goals. 

When a portfolio is anchored to a thoughtful financial plan, it becomes easier to stomach periods of change. There is less need to chase whatever happens to be performing best because the portfolio was never built around a single prediction in the first place. 

Instead, we ask a different question: Does this portfolio continue to provide a high probability of accomplishing the goals that matter most? 

That perspective doesn't eliminate uncertainty. It simply helps us respond to uncertainty with patience rather than reaction. 

Built for Uncertainty

None of this means the risks have disappeared. Markets will almost certainly face new challenges that we cannot anticipate today, and periods of volatility are inevitable. 

But this year has offered an important reminder: the market often does its best work while investors are focused on reasons it shouldn't. 

While leadership changes, narratives change, and headlines change, the importance of your goals does not. 

That is why we continue to believe in thoughtful financial planning, broad diversification, tax-wise investing, and the discipline to stay focused on what matters most. 

The objective has never been to predict every twist in the market. It is to build a financial plan and portfolio that can succeed through many different kinds of markets. 

At the beginning of the year, many investors would have predicted a very different outcome than the one we've experienced. 

We cannot know which companies, sectors, or countries will lead next… fortunately, we do not have to.

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Disclosure:
This material is provided for informational and educational purposes only. It should not be construed as investment, legal, or tax advice, nor does it constitute a recommendation or solicitation to buy or sell any security. Investors should consult with a qualified financial professional before making any investment decisions. Rebalancing and asset allocation strategies do not ensure a profit or protect against loss in declining markets. There is no guarantee that any investment strategy will achieve its objectives. Any references to historical performance, academic studies, or research are based on past data and should not be considered indicative of future results. Past performance is not a guarantee of future outcomes. Advisory services offered through Human Investing, an SEC-registered investment adviser.

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The media offers plenty of reasons to worry. The ongoing conflict in the Middle East, AI rendering human workers obsolete, rising energy costs, the list goes on and on. If you’re investing for the long run, know that headlines will consistently try to pull you off course. Remember why you’re investing: You’re aiming to grow your dollars today to ensure you can maintain (or even grow) your spending power in the future. The rollercoaster of owning equities is rewarded with greater returns and spending power in the future.

Understanding the risk and reward of investing can be challenging. The finance industry likes to use terms like Beta or Standard Deviation. While these are statistically sound measures, most people would be hard-pressed to provide a clean and clear definition of what they mean, or how they’re calculated. Even most advisors would struggle to provide accurate definitions on the spot.

We try to communicate in Human terms with our clients, and we’ve built some charts and graphs to help communicate that. Given the current concerns and headlines, I think this is a great time to showcase some of our favorite graphs.

This is one of our favorite graphs. It's always easier to see that yesterday's worries weren't as scary once they're in the rearview mirror. Even through the Dot-Com bubble bursting, the 07-08 global financial crisis, and the COVID-19 global pandemic, stocks have risen. While we may not know the length or extent of a given market downturn, we do know companies have historically navigated challenges and delivered positive returns to long-term investors. We expect that resiliency to continue.

Introducing Intra-Year Declines

Markets rarely move in a straight line. Even in strong years, there’s almost always at least one significant drop along the way — what we call an intra-year decline. It measures how far the market fell from its highest point before it started recovering. As you can see in the chart below, intra-year declines have occurred every single year in the S&P 500 since 1990.

As I’ve written previously, the stock market is biased towards delivering positive returns. Most calendar years, stocks are up. This graph speaks to the lived experience of investors: every year has a downturn, no exceptions. I’m sure each downturn felt reasonable but worried investors at the time. No investor from 1990-2025 was immune from seeing their portfolio go down. Those who stuck with it saw positive returns in over 80% of those years.

Even amidst recent headlines, the market’s behavior has been typical. The S&P 500 dropped roughly 9% from its January peak to its March low. This is well within the normal range of market volatility where intra-year declines of 10% or more are common.

Most investors don’t own 100% equities, so it’s important to understand how introducing bonds can reduce risk. 60% equity and 40% bonds (60/40) is a common allocation because it tends to be a sweet spot between positioning your portfolio to grow and reducing risk enough to weather the volatility. Knowing where your asset allocation should be and when is an important, personal, complicated conversation that should involve a financial planner.

As you can see, while shifting from stocks to bonds doesn’t eliminate downturns, it certainly lessens them. Higher returns tend to come with more ups and downs, while smoother rides usually mean lower long-term growth. There’s no perfectly safe way to grow your dollars faster than inflation, so risk is always going to be part of your investment strategy. The key is finding the right balance between how much risk you’re comfortable with and how much risk you actually need to take to reach your financial goals.

Making plans that last

Anytime we’re designing a portfolio at Human Investing, we’re trying to make decisions we’d be okay with over the timeframe that matters for YOUR goals. That doesn’t mean we don’t revisit or adjust, but we’re not trying to make short-term tactical moves. We know outsmarting the market is incredibly difficult to achieve. We’re planning for our clients’ lifetime, not the next 6 months. We want to ensure our clients are positioned in a way where they are capturing the growth necessary to reach their financial goals, while having enough safety they don’t panic because of a temporary downturn.

No matter how you think about risk, there are a few enduring truths. Stocks are a volatile investment, but they’ve historically been a great growth engine in the long run. Whatever headline or concern today will feel much smaller in the rearview mirror.  

Your financial plan and investments are meant to serve you over your entire life, not the current news cycle. There will be times when it makes sense to revisit your allocation, especially when your personal circumstances change. Those decisions should be driven by your goals, not the headline of the week.

We’re always happy to have conversations to help you understand how your allocation is set to fit your needs. Call us at 503-905-3100, or email hi@humaninvesting.com.

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Disclosure: This material is provided for informational and educational purposes only. It should not be construed as investment, legal, or tax advice, nor does it constitute a recommendation or solicitation to buy or sell any security. Any market commentary, forward-looking statements, projections, or return expectations discussed are based on assumptions and current information and are subject to change. There is no guarantee that these views will be realized. Investors should consult with a qualified financial professional before making any investment decisions. There is no guarantee that any investment strategy will achieve its objectives, and investing involves risk, including the potential loss of principal. References to market indexes (including the S&P 500 and blended stock/bond allocations) are for illustrative purposes only, are unmanaged, and do not reflect the performance of any specific investment or client account. Index returns do not reflect the deduction of fees or expenses. Historical returns, projections, or economic conditions are illustrative only and should not be considered indicative of future results. Past performance is not a guarantee of future outcomes. Asset allocation and diversification strategies do not ensure a profit or protect against loss. Advisory services offered through Human Investing, an SEC-registered investment adviser.

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Recent developments in the Middle East have once again drawn attention to oil markets. When tensions rise in regions responsible for a meaningful share of global energy production, investors naturally begin to ask how higher oil prices might influence the broader economy and financial markets.

Before discussing the financial implications, it is important to acknowledge the human side of these events. Conflicts like this affect families and communities around the world in ways that extend far beyond markets and economics.

Still, it’s natural for investors to wonder how disruptions in energy markets might affect their investments. Our aim is to provide context that can help frame those concerns.

Why do oil prices matter so much?

Energy plays a central role in the global economy because oil sits near the beginning of the production chain for many industries. It powers transportation networks, supports manufacturing, and is embedded in the production of everyday goods ranging from food to plastics and chemicals. When oil prices rise quickly, those higher costs move through supply chains and eventually reach businesses and households in the form of higher prices.

History shows that sharp oil spikes have often coincided with periods of economic stress, though they are rarely the sole cause.

It is understandable that headlines often focus on oil during geopolitical conflicts. When energy costs rise quickly, pressure on the broader economy can follow.

Geopolitical conflicts often bring uncertainty to both energy markets and financial markets. We explored how markets historically respond to war and global conflict in a previous piece, which you can read here: War and the Market: What Does History Teach Us?.

Why today’s energy landscape is more resilient

Looking at several decades of data provides helpful perspective when considering why the economy may respond differently to oil shocks today.

There is useful context when looking at global oil supply. The United States now produces roughly 20% of the world’s oil, while Iran accounts for about 3–5%. That balance looked different during earlier oil shocks. In 1979, Iran produced close to 10% of global supply, while the United States accounted for roughly 15%. This shift means the global energy system is more diversified and less dependent on any single region than it was during past crises.

Households also appear to have more buffer against rising fuel prices than in earlier periods. One measure economist often watch is how much households spend on gasoline relative to their income.

Historically, economic stress has tended to increase when gasoline spending rises above about 5% of household income. Today that figure sits closer to 2–3%, suggesting households, broadly, have more room to absorb fluctuations in energy prices than during past oil shocks.

The chart below illustrates how gasoline spending as a percentage of household income has changed over time and why economists often watch this measure during periods of rising oil prices.

Shaded areas indicate U.S. recessions.
Source: U.S. Energy Information Administration, Bureau of Economic Analysis, Federal Reserve Bank of St. Louis

Finding Your Footing During Energy Market Volatility

Periods of geopolitical uncertainty often bring volatility to both energy markets and financial markets. Oil prices can move quickly as investors react to changing expectations about supply and demand.

For investors, the more relevant question is how these developments influence their financial plan.

At Human Investing, portfolios are designed with a range of economic environments in mind. Energy price shocks, while disruptive in the short term, represent only one of many forces that influence markets over time. Diversified portfolios allow different parts of the market to respond differently as economic conditions change.

For example, companies that rely heavily on fuel may face higher costs when energy prices rise, while energy producers may benefit from stronger prices. These adjustments tend to occur within the market rather than outside it.

Because of this, our focus for investors remain on their broader financial plan, investment timeline, and overall diversification.

Oil markets may move quickly in response to geopolitical events, yet long-term investment outcomes are shaped by many forces over time.

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Disclosure:
This material is for informational and educational purposes only and is not investment, legal, or tax advice. References to historical events or market trends are illustrative and do not guarantee future results. Investing involves risk, including possible loss of principal. This commentary does not constitute a recommendation to buy or sell any security or adopt any investment strategy. Human Investing, LLC is a registered investment adviser; registration does not imply a certain level of skill or training.

Sources
Energy Institute. (2024). Statistical review of world energy 2024.
Graefe, L. (n.d.). Oil shock of 1978–79. Federal Reserve History.
U.S. Bureau of Economic Analysis. (2026). Disposable personal income (DSPI). Retrieved from FRED, Federal Reserve Bank of St. Louis.
U.S. Bureau of Labor Statistics. (n.d.). U.S. Bureau of Labor Statistics.
U.S. Energy Information Administration. (2026).U.S. product supplied of finished motor gasoline (thousand barrels per day).

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