The decision on when to file for retirement benefits warrants careful consideration. According to SSA.gov, the maximum monthly Social Security retirement benefit that an individual can receive per month in 2025 is $5,108 for someone who files at age 70. For someone at full retirement age, the maximum amount is $4,018, and for someone aged 62, the maximum amount is $2,831.
While having a plan is useful, circumstances like a change in employment may require a change in course. As with all financial decisions, there is no one-size-fits-all solution when it comes to filing for – or changing – your Social Security retirement benefits. In this insight, we’ll cover:
- Projecting your Benefits
- Life Expectancy and Social Security
- How Marriage Affects Your Benefits
- How to “Undo” Your Benefits
- Social Security Planning and Your Overall Financial Picture
- Concerns About Social Security Solvency
- Making an Informed Decision
Projecting Your Social Security Retirement Benefits
The benefit awarded is based upon your earnings history indexed for changes in living standards over time. The monthly benefit amount is called your Primary Insurance Amount (PIA). The PIA is then anchored to your full retirement age (FRA). Your full retirement age is determined by your date of birth. You can find your full retirement age by referencing this retirement benefits chart. You can check your projected benefit anytime by registering for an account with SSA.gov.
Once you have a sense of your retirement benefit, the three scenarios you are faced with are:
- Take your Retirement Benefit Early | Between 62 and Full Retirement Age: Your benefits will be reduced by as much as 30% at age 62.
- Wait Until Full Retirement Age: You will collect 100% of the benefit.
- Delay your Retirement Benefit | Between Full Retirement Age and age 70: Your benefits will increase by as much as 24% by age 70.
Life Expectancy
People are often eager to file for benefits when they reach age 62. After all, they have worked and paid into the system for many years. While it may be appealing to take the benefits as soon as possible, the math may not be as compelling.
According to a life expectancy calculator provided by the Social Security Administration:
- A man turning age 67 on April 1, 2025 can expect to live, on average, until age 85.
- A woman turning age 67 on April 1, 2025 can expect to live, on average, until age 87.
Of course, life expectancy calculators simply provide averages. Family history and lifestyle are important factors when evaluating your unique circumstances.
A break-even analysis is used to determine how long you would need to live to make deferring your benefit worthwhile. If you delay taking Social Security retirement benefits and pass away before the breakeven point, you will have collected less by having waited. On the flip side, if you take benefits early, and live a long life, the cumulative benefit you collect may be hundreds of thousands of dollars less than if you waited.
Consider the following example: An individual is deciding between the following A) $2,831 per month at age 62 B) $4,018 per month at age 66 and C) $5,108 per month at age 70. The cumulative benefits received for each scenario are expressed in the chart below:
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This individual has a breakeven age of 78 when comparing taking benefits early to full retirement age benefits, a breakeven age of 80 when comparing full retirement age benefits to delayed benefits and a breakeven age of 82 when comparing early benefits to delayed benefits.
When viewed through a different lens, Social Security can be considered a form of longevity insurance. Moreover, Social Security benefits are adjusted annually for inflation. For these reasons, Social Security benefits continue to be an important cornerstone of retirement, especially as fewer and fewer employers offer traditional pension plans.
How Marriage Affects Social Security Retirement Benefits
To assess the impact of taking Social Security at different ages, one must consider the relationship between their benefit, their spouse’s benefit, and their life expectancy.
For married couples, it is important to keep in mind that when one spouse dies, the surviving spouse will continue to receive their own benefit or their spouse’s benefit, whichever is higher. If the higher-earning spouse can wait until age 70 and obtain the maximum benefit, then no matter which spouse dies first, the survivor will continue receiving the maximum benefit for the rest of their life.
While the average life expectancy for an individual is age 85-87 range (men/women), it is notable that the joint life expectancy for a 65 year old couple is closer to age 89. In other words, when calculating the break-even age, one should consider joint life expectancy and understand that there is a decent probability that at least one spouse could live well into their 90s.
For couples where one spouse has little or no earnings history, Social Security still provides a benefit through the spousal provision. In this case, the lower-earning spouse may be eligible to receive up to 50% of their partner’s benefit at full retirement age. This amount may be reduced if benefits are claimed before reaching full retirement age.
You may also have questions regarding Social Security benefits in case of a divorce or if you are a widow. We can help with these situations as well.
Possible “Undo” Button for your Social Security Retirement Benefits
If you chose to take Social Security benefits early and now wish that you had not done so, there are a few ways that you could possibly ‘undo’ that election.
You could pay back up to 12 months of Social Security benefits, thereby restoring some credits.
If you have not yet reached your full retirement age, you could go back to work. In which case, the earnings cap would come into effect.
Finally, if you already reached full retirement age, but are not yet 70 years old, you could suspend benefits to effectively earn credits to make up for the penalty from taking early. Note that if you suspend benefits, ‘spousal benefits’ are also suspended.
Social Security Planning and Your Overall Financial Picture
When looking solely at cumulative lifetime benefits, it may be advantageous to wait to take Social Security at age 70. Of course, delaying payments can put a strain on other financial resources, so Social Security claiming decisions should be made with consideration to your balance sheet.
Taking Social Security at full retirement age may mean less withdrawals are needed from your IRA to cover expenses. Distributions from a Traditional IRA are fully taxable as ordinary income whereas Social Security income enjoys tax benefits.
For many of clients, the first 85% of Social Security income is taxable on the Federal level. In addition, many states, such as New York, do not impose tax on Social Security income.
One may also consider filing for benefits prior to age 70 if they deem it a bad time to take money out of their investments as a result of a down market.
On the other hand, taking Social Security prior to age 70 could limit the effectiveness of tax planning strategies. For example, it may limit the effectiveness of doing Roth conversions as Social Security income might push you into a higher tax bracket.
At the end of the day, health and longevity play the biggest role in this decision. Even for those with a long anticipated lifespan, they still may want to enjoy the money while they are younger and healthy and are willing to give up the added income later in life to enjoy the extra cash flow now.
The bottom line: filing for Social Security should be analyzed in conjunction with your whole financial picture.
Recent Legislation: The Social Security Fairness Act
As of January 5, 2025, the Social Security Fairness Act has been signed into law, marking a significant change for many retirees whose benefits were previously reduced under two longstanding provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
These rules historically reduced (or in some cases eliminated) Social Security benefits for individuals who also receive a pension from employment not covered by Social Security (often referred to as a "non-covered pension"). This affected a wide range of public sector workers, including:
- Teachers, firefighters, and police officers in several states
- Federal employees under the Civil Service Retirement System (CSRS)
- Workers with a foreign social security benefit
With the passage of the Act, both WEP and GPO are now repealed. For those who were impacted, this change may result in a significant increase in monthly Social Security benefits.
If you have a non-covered pension and were previously affected by WEP or GPO, this is an important moment to revisit your retirement income projections. We recommend speaking with your advisor to evaluate how these changes may affect your long-term planning.
Viability of Social Security
One question that often comes to mind is the viability of the Social Security system in the first place, especially in the next 10 to 20 years. Some estimates anticipate reserves to be depleted as early as 2032. At which point, projected inflows will only be sufficient to meet about 77% of projected outflows.
While concerning, lawmakers are likely to make revisions to the current structure. Some ideas that have been proposed include, raising the amount of income that is subject to Social Security tax, the rate on said tax, raising the Full Retirement Age, and reducing benefits. It is highly unlikely that Social Security will disappear entirely.
While it is impossible to say how Social Security will change, it is important to stay up to date and, to the extent you are able, minimize your long-term financial reliance on the benefits.
Steps for Making an Informed Decision
Making an informed decision on Social Security will impact not only your long-term cash flow, it will also impact how much you need to withdraw from your portfolio and strategies aimed at saving on taxes throughout retirement. We can help navigate this decision if you follow these 2 steps:
Step 1. Request a statement from www.SSA.gov. This will show you benefits projections and your earnings history.
Step 2. Meet with your financial advisor — ideally a fiduciary who can assist with your overall retirement plan — to review the math and determine a strategy on when to take Social Security in a manner that fits best with your overall financial plan.
Want to learn more about how a financial advisor can help with Social Security planning? Contact us today.