For many retirees, Social Security is a critical piece of their income puzzle. But with so many claiming strategies, age considerations, and tax implications, it’s easy to make a mistake that could cost you thousands over your lifetime. Let’s break down what you need to know to maximize your Social Security benefits and avoid common pitfalls.
One of the biggest decisions retirees face is when to start claiming Social Security. While you can begin as early as age 62, delaying until full retirement age (FRA) or even age 70 can significantly increase your monthly check. Here’s how it works: Claim at 62, and you’ll receive a reduced benefit—about 25-30% less than what you’d get at FRA. Wait until full retirement age (66-67, depending on birth year), and you get 100% of your benefit. Delay until age 70, and your benefits grow by about 8% per year—a significant increase in guaranteed income. Bottom line: If you can afford to wait, delaying your benefits can provide a substantial boost to your retirement income.
1. When Should You Claim? Timing is Everything
One of the biggest decisions retirees face is when to start claiming Social Security. While you can begin as early as age 62, delaying until full retirement age (FRA) or even age 70 can significantly increase your monthly check.
Here’s how it works:
Claim at 62, and you’ll receive a reduced benefit—about 25-30% less than what you’d get at FRA. Wait until full retirement age (66-67, depending on birth year), and you get 100% of your benefit. Delay until age 70, and your benefits grow by about 8% per year—a significant increase in guaranteed income. Bottom line: If you can afford to wait, delaying your benefits can provide a substantial boost to your retirement income.
Bottom line: If you can afford to wait, delaying your benefits can provide a substantial boost to your retirement income.
2. Will Social Security Be Taxed? Many Retirees Are Surprised
Many people don’t realize that their Social Security benefits can be taxed, depending on their income level. If your provisional income (which includes half of your Social Security plus other income sources) exceeds certain thresholds, up to 85% of your benefits could be taxable. Provisional Income Taxable % of Benefits
Less than $25,000 (single) / $32,000 (married) 0%
$25,000 – $34,000 (single) / $32,000 – $44,000 (married) Up to 50%
More than $34,000 (single) / $44,000 (married) Up to 85%
Tax Tip: If you have tax-deferred accounts like a 401(k) or IRA, managing your withdrawals strategically can help reduce your taxable Social Security income.
3. The Spousal Benefit Strategy: Don’t Leave Money on the Table
If you’re married, spousal benefits can be a game-changer. A lower-earning spouse can claim up to 50% of their higher-earning spouse’s benefit at full retirement age.
Even divorced spouses (if married for at least 10 years and currently unmarried) can claim spousal benefits, potentially increasing their income in retirement.
Claiming Tip: The higher-earning spouse may want to delay claiming their benefits to maximize both their own and their spouse’s income.
4. Will Social Security Run Out? Understanding the Future of Benefits
You’ve likely heard headlines about Social Security running out of money. While the system does face funding challenges, here’s the reality:
- The Social Security trust fund is projected to be fully funded until 2034. After that, without changes, incoming payroll taxes would still cover about 77% of scheduled benefits.
- This doesn’t mean Social Security will disappear—it just means adjustments (like higher payroll taxes or reduced benefits) could happen.
5. Smart Strategies to Maximize Your Social Security Benefits
- Work at least 35 years – Benefits are based on your highest 35 earning years. Fewer years = lower average earnings.
- Be strategic about when you claim – Early filing means lower benefits for life.
- Consider tax-efficient withdrawals – Balancing withdrawals from different accounts can help reduce your tax burden.
- Look into spousal and survivor benefits – Maximizing your household’s benefits can make a big difference.
- Consult with one of our advisors – A well-planned Social Security strategy can add hundreds of thousands of dollars to your lifetime income.
Watch the replay of our “Social Security Basics” Webinar,
Presented by Laura Lehrhaupt, CFF
https://event.webinarjam.com/go/replay/248/qy1q2cn2b0gsmvik