October is National Retirement Security Month, which can cause anyone to harbor dreams about retirement from our chosen career. Some may even have dreamt of that milestone for many years, imagining a day when we can just sit back and watch the world go by or, perhaps, fulfill our bucket list by enjoying things previously delayed in pursuing a career and raising a family. If you’re starting to contemplate finally fulfilling that retirement dream, what better time than now to evaluate your options?

How does Social Security fit in retirement?

As you do, you will surely find yourself thinking about Social Security, wondering how much you’ll get and when might be the best time to take it. Reality is, you will most likely depend a lot on your Social Security income during your so-called “golden years.” In fact, about 52% of individuals get at least half of their retirement income from Social Security, and over 25% get 90% or more of their retirement income from Social Security. The point is, Social Security will almost certainly be an important part of your retirement planning, so you should give careful thought to the best time for you to claim it. Here’s what to consider:

When can you claim Social Security and how much will I get?

Start by understanding that you have an 8-year window to claim Social Security, but your age when you claim determines how much you’ll get each month. How old you are when you claim, relative to your SS full retirement age (FRA), determines whether you’ll get more than, or less than, the full Social Security benefit you’ve earned from a lifetime of working. At your FRA, you will get 100% of your individually earned “Primary Insurance Amount” (PIA), but if you claim earlier you’ll get less, and if you claim later you’ll get more. How much less or more?  Well, if you claim at age 62 and your FRA is age 67, you’ll get only 70% of your PIA. And if you claim at age 70 and your FRA is 66, you’ll get 132% of your PIA. It’s important to know that these amounts are permanent (except for Cost of Living Adjustments (COLA), which may be awarded annually). So how much can you get at different ages?  Find out by requesting a Statement of Estimated Benefits from the Social Security Administration or obtain same at your “my Social Security” online account at www.ssa.gov/myaccount. Your Statement will show your estimated monthly benefits at different ages – but you’re not done yet. Knowing how much your benefits will be at different ages is only part of determining what is your personal  “best time” to start collecting Social Security.

What is the “best time” to claim Social Security?

The “best” time to claim Social Security is different for everyone and should always consider the urgency of your financial need, your life expectancy, and your marital status. And, if you are still working, you must also consider whether your work earnings will affect your SS benefits.

The urgency of your financial need is, obviously, an important factor. If you’re struggling to meet living expenses, a monthly Social Security check can help ease that burden.  Indeed, it’s fair to say that financial need trumps all other factors in your decision. But the key word here is “urgency” – just taking Social Security “because it’s there” may be convenient, but you should look at other income opportunities as well. Many find that using investment earnings or savings to temporarily supplement income is a good way to delay claiming Social Security to get that higher monthly SS payment for life. Still others find that continuing to work is a viable option, allowing you to defer Social Security for the higher monthly benefit. Remember, Social Security benefits grow with each month you wait to claim, and those higher benefits are for life. Once you reach your FRA, SS benefits grow by 8% for each full year of delay, which can make your age 70 benefit about 75% more than your age 62 benefit and as much as 32% more than your FRA amount.  So choose wisely, but keep the following key questions in mind:

What to consider when deciding “when”

• How long will you be collecting benefits after you retire?  Life expectancy plays a key role in retirement planning (see this article), and you certainly don’t want to run out of money later in life. Inflation is also inevitable, and Social Security benefits are adjusted for inflation, so getting the highest possible Social Security benefit now (when you first retire) is the best way to help your future self to enjoy financial comfort in retirement.
• Will you be working at any time before your full retirement age (FRA)? If so, and you claim benefits before your FRA, you will be subject to Social Security’s “earnings test” which limits how much your can earn while collecting early benefits. The earnings limit for 2024 is $22,320 and, if that is exceeded, Social Security will take back $1 in benefits for every $2 you are over the limit.  They “take back” by withholding further benefits, which means you could go months without receiving Social Security (how many months depends on how much you exceed the limit by). There are several nuances to the “earnings test,” including a higher allowable earnings amount during the year you reach FRA, but if you claim benefits early and continue to work, you must stay aware of the “earnings test” because it can affect your benefits.
• Do you have any dependents who can collect Social Security based on your SS earnings record? The most common consideration, if you are married, is that your spouse may be entitled to benefits based on your record. If your spouse’s own Social Security retirement benefit at FRA is less than 50% of your PIA, then your spouse will be entitled to an additional amount. Or if your spouse isn’t entitled to their own SS retirement benefits, they may still be eligible for a spousal benefit from you. And if you have minor children under 18 (or up to 19 if still in high school), they may also be eligible for benefits on your record.  And a former spouse may also be eligible for benefits on your record in certain circumstances.  So, if you have dependents, when you claim Social Security may affect their benefits as well.  Dependent benefits can be tricky, so if this applies, you should carefully evaluate how dependent benefits fit into your decision for when the “best time” is to claim your Social Security.

How can I get help?

As you can see, navigating the labyrinth of Social Security’s 2,700+ rules and regulations can be a daunting task, but it’s not one you have to do alone. The AMAC Foundation’s Social Security Advisory Service stands ready to answer all your questions about Social Security and Medicare enrollment, and there is never a fee to get assistance from our certified and NSSA® accredited advisors. You can email your questions to [email protected], or just call us during normal EDT business hours at 1.888.750.2622.  We look forward to answering your questions.