Maximizing Social Security: It's Personal

Social Security and retirement seem to go hand-in-hand, an inevitable financial step in everyone's post-working life. However, the how and when of Social Security are not a one-size-fits-all. Some people may be surprised to learn that there are different strategies but choosing one can be complicated. Before we dive in to those details, let's look at who's taking advantage of these benefits.

Dimensions of Social Security Dependency

Millions of people in the United States depend on Social Security. Nearly 90% of people over age 65 receive Social Security. For many retirees, these benefits are a major part of their financial equation. In fact, Social Security represents at least half of the total income for 48% of beneficiary couples (and 69% of non-married beneficiaries).1

What's more, dependence on benefits may be on the rise. According to a Gallup poll  , younger and older Americans plan to rely more on Social Security. Compared to a decade ago, the number of non-retirees aged 18-29 who say Social Security will be a "major source of retirement income" has increased 13 percent.

Getting the Most Out of Social Security

For those expecting to rely on these funds, the next question should be, "How do I maximize my Social Security benefits?" There are a variety of factors to consider, but most of them center around when to start collecting benefits. That's important because when you start affects how much you receive.

Here's how it works: let's say you were born in 1954. You could have started drawing benefits at age 62. But if you had, you'd have locked in monthly payments 25 percent smaller than if you waited until your full retirement age (FRA) of 66. Or if you delay your benefits until you're 70, you could collect 32 percent more monthly than at age 66.

At first glance, it may appear that waiting is better. However, knowing whether to draw early or wait—and how long to wait—all depends on your personal situation.

Collection Considerations

More Money for the Married: If you've been married for at least 12 months, you can take advantage of spousal options. These benefits are based on the primary worker's benefit amount. For example, Sam's spouse, Kathy, may receive up to 50 percent of Sam's benefit. If Kathy is also eligible for benefits based on her work history, she's eligible for either her own benefit or the spousal one, whichever is higher. In the event of death, the surviving spouse can collect his/her own benefit or the deceased spouse's benefit, whichever is higher.2

More Choices for the Married: The amount of your benefit is based on a three-part calculation and an average of the best 35 years of your earnings. That means you may have one spouse with a larger benefit than the other, or they could be eligible for comparable amounts. Either way, when both spouses are eligible for benefits, more variables are added to the "draw now/draw later" equation.

Let's revisit the Sam and Kathy example, where Sam's benefit is more than double Kathy's. Note this strategy intends to increase Sam's benefit and maximize the survivor benefit.

Spousal Benefits Can Boost Your Bottom Line

Long on Life? One important consideration in deciding when to start benefits is longevity. A person's survival probabilities are dependent upon factors such as family health history, lifestyle and existing medical conditions. The longer you live, the more time you have to draw benefits. If you expect to live into your eighties, delaying benefits may mean you accumulate more benefits in the long run—up to a breakeven point. Breakeven refers to the age when your total Social Security income from two options reaches the same amount. If you don't expect to live that long, you may find it's better to draw benefits early.

Below, we show three scenarios for Sam and Kathy, outlining their breakeven points in relation to their start dates. In this example, if Sam delays benefits until 70, he'll need to live until age 81 to accumulate the same amount of benefits he would if he started at age 62.

If Longevity Is Not On Your Side, Earlier May Be Better

Kathy $700/month, FRA 66. Sam $2,400/monthly, FRA 66. *Probability of living to ages shown as of age 65. The above chart represents an example accumulated benefits with early filing combined with late filing to increase Social Security benefits. Results may differ depending on each individual's earnings history.


Short on Savings? Drawing benefits early may seem like a clear choice for pre-retirees with little to no retirement savings. However, remember that starting early means locking in lower benefits. Seniors in this situation should consider working longer if their health permits. For a person reaching their FRA at 66, every year you can delay allows your benefit to grow incrementally higher.3

Plan Ahead: Benefits Won't Match Previous Earnings

One last, but critical, factor to keep in mind as you plan for retirement: benefits won't replace what you currently earn. In an example based on "medium income," a worker who made $50,021 annually in pre-retirement income, would receive Social Security benefits of $20,742 annually. That's less than half of what he or she made in their working years.

While Social Security will not replace your current wages, it should be part of your overall retirement planning strategy.

1 Source: Fast Facts & Figures About Social Security, August 2019

2 Source: SSA Publication No. 05-10024, ICN 454930, March 2016. Spousal benefits: Spouses cannot apply for spousal benefits until the primary worker has filed for Social Security. Survivor benefits: Surviving spouse must be at least 60 years old (50 years old if disabled). The couple must have been married for at least nine months prior to the decedent's death (with exception for accidents).

3 For a person reaching FRA at 66, the per year increase is 5 percent from age 62-63, 6.67 percent from age 63-66 and 8 percent from 66-70.

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