PLANNING FOR AND TRANSITIONING INTO RETIREMENT is challenging enough without wrestling with the complexities of Social Security. Reduce confusion and make better choices by separating facts from myths and understanding when to claim benefits.
Can I count on Social Security income to be there when I retire?
Reports about Social Security being “bankrupt” are common, but the reality is more nuanced. Trustees project that, even without policy changes, the Social Security trust funds will be able to pay full scheduled benefits until at least 2033. After that date, estimates indicate a portion of benefits—roughly 79 percent under current law—could continue to be paid for many years. While future reforms are possible, current expectations mean most workers, including those in their 30s today, should plan on receiving Social Security benefits as a part of their retirement income.
So if I can count on it, when should I take it?
Your Social Security retirement benefit is determined by your average earnings during your career and the age at which you begin claiming benefits. Full retirement age depends on your birth year: for those born between 1943 and 1954 it is 66, and it increases gradually up to age 67 for people born in 1960 or later.
You can claim benefits as early as age 62, but doing so permanently reduces your monthly payment—sometimes by as much as 30 percent compared with waiting until full retirement age. Alternatively, you can delay claiming past full retirement age up to age 70. Delaying increases your benefit through delayed retirement credits, which amount to roughly 8% per year (about two-thirds of 1% per month), capping at age 70. That can raise your eventual benefit by as much as about 32 percent compared with claiming at full retirement age.
Deciding when to claim usually depends on three main factors: existing savings and assets, current income needs, and health or family longevity. If you have substantial retirement savings, steady income, or a family history of long lifespans, waiting to claim can make sense. Conversely, if you need cash flow sooner or your resources are limited, starting benefits earlier may be appropriate. Generally, for people who live past their 80s, delaying benefits until age 70 tends to be advantageous, but every situation is unique. Consider your personal finances, expected longevity, and other income sources when making this choice.
Are there claiming strategies for married couples?
Married couples have additional options to consider. A spouse who has little or no work history in a job covered by Social Security may still qualify for spousal benefits based on the other spouse’s earnings record. Spousal benefits are not automatic; the spouse must apply. Timing and coordination between spouses can have a significant impact on household lifetime benefits, and strategies can vary depending on ages, earnings histories, and each person’s retirement plans.
Because Social Security decisions can be complex and long-lasting, the best first step is to start planning early. Discuss your situation with a qualified financial professional who can help evaluate claiming strategies alongside your broader retirement plan and financial goals.