What to Know Before Claiming Social Security Benefits
By Mark Zagurski, CLU®, ChFC®, CMFC® and CRPC®
Summary: There is no single, one-size-fits-all approach to claiming Social Security benefits. Timing is crucial, however. This article explains how to make a smart Social Security claim by factoring in timing, taxes, and your personal financial goals.
If you’re like many Americans nearing retirement, you’re probably planning to use Social Security benefits to help cover basic costs like groceries and utilities and potentially even your bigger lifestyle dreams, such as traveling, pursuing hobbies, and helping family members. Or you may be among those itching to use the benefits to invest and help grow your savings.
Whatever your situation, the reality is that more than 67 million Americans receive Social Security benefits today. Of those, 40% count on it for at least half of their income, while for 14% of beneficiaries, it covers nearly all their income.1 The Cost of Living Adjustment (COLA) attempts to keep Social Security benefits in line with inflation, helping beneficiaries maintain their purchasing power over time, no matter when they start receiving benefits or how much they get.
Despite being a critical source of inflation-adjusted lifetime income for many, Social Security might not cover all your needs. Here’s why this might be the case for you:
- Rising living costs:Inflation can decrease the buying power of your benefits over time, so having other income is crucial.
- Healthcare expenses:As you get older, medical costs can go up a lot, and Social Security might not be enough to cover these.
- Lifestyle goals:Many retirees aim for financial goals beyond basic living, which require more than just Social Security.
The bottom line: Social Security supplements only part of your pre-retirement earnings, usually about 43% for the average worker.2 This means you’ll likely need extra savings or income to keep up your standard of living. That’s why it’s important to see how Social Security fits into your overall retirement financial plan by reviewing all income sources like savings, pensions, or investment accounts. A financial professional can help you sort through your income sources and build a holistic financial plan that incorporates your Social Security claim.
You can use this calculator to estimate how much retirement income Social Security will provide.
Timing is everything
When to claim Social Security benefits is one of the most important decisions you can make as you approach retirement. The debate over timing is intense among professionals and retirees, with an increasing number of individuals advocating for retirees to claim Social Security benefits at age 62.
Yes, that’s the earliest you can start, but that means you will cut your monthly benefit by 30% compared to waiting until you’re 67, which is the full retirement age for those born in 1960 or later. If you wait until 70, your monthly benefit can go up by 24% more than at 67.
Let’s explore two scenarios showing how the timing of claiming Social Security benefits can influence the amount you receive:
Case 1: Lisa files early at 62
Lisa claims her Social Security benefits at the age of 62. As a result, her monthly benefit is $1,200. Over her lifetime, which spans until the age of 78, she receives approximately $230,400.
Case 2: Mark waits until 70
Mark delays his benefits until he is 70 years old. His monthly benefit then amounts to $2,100. If Mark lives until the age of 78, he will receive about $201,600. However, if he lives until 85, his total benefits will rise to $378,000.
Of course, sometimes it might make sense to claim benefits earlier. For instance, if you have health concerns or a shorter life expectancy, it may be advisable to claim benefits before your full retirement benefits kick in.
Deciding when to claim Social Security benefits
Be wary of generic advice online about how long you should wait before collecting Social Security benefits. Before you make the timing decision, keep these four things in mind:
- Your personal situation
- The amount of Social Security benefits you can receive
- How those benefits are figured out
- The real value of those benefits
Your personal situation
- Health and life expectancy:If you’re in good health and expect a long life, delaying benefits can increase your monthly payments, offering the potential for financial security over time.
- Marital status and spousal benefits:For married couples, planning is more intricate. You can claim up to 50% of your spouse’s benefits, based on their earnings and when claims are made.³ Coordinating strategies can help maximize these benefits, especially survivor benefits, which may allow the surviving spouse to receive up to 100% of their partner’s benefits.
- Balancing work and retirement:You can claim Social Security and still work, but earnings might reduce your benefits and affect taxes. Consider whether you’ll continue working after claiming, or if a gradual retirement suits you.
The amount of Social Security benefits you can receive
Your estimated Social Security benefit amount is a key factor in your decision. The Social Security Administration calculates your benefits based on your lifetime earnings, but your monthly payment also depends on the age you choose to claim.
- Age 62 (Early Benefits):Provides income sooner but could mean lower lifetime benefits if you live longer
- Age 67 (Full Retirement Age):Generally, those born after 1960 reach their full benefit at 67
- Age 70 (Delayed Benefits):Waiting increases your monthly payment, ideal for those expecting a longer life.
Use the SSA calculator or your personalized statement on SSA.gov to estimate your benefit amounts at different ages.
How those benefits are figured out
Once you’ve considered your personal situation, the next step is to consider how much you can receive at different ages. That is why it’s key to plan your retirement age. Remember that delaying until age 70 increases your monthly amount by 77% compared to starting at 62.
The exact amount you may receive depends on several factors. You can figure out a baseline primary insurance amount or PIA based on your Average Indexed Monthly Earnings (AIME).4 The AIME considers your earnings throughout your career, adjusting for inflation up to age 60, and then averages your 35 highest-earning years, including those after 60.
Here’s why AIME matters: If those 35 years include some low-earning ones compared to what you make now, holding off on claiming can let you include more recent, higher earnings. For example, if by age 62 you only have 34 years of earnings, waiting to claim can add another year of earnings like your average, bumping your AIME up.
You can log in to the Social Security Administration’s website to view your earning history and estimated benefits.
The real value of Social Security benefits
It’s important to consider the purchasing power of your benefits over time. Social Security includes annual cost-of-living adjustments (COLA) to help keep pace with inflation, but these increases may not fully offset rising costs in retirement, especially healthcare expenses. Also, taxes on Social Security benefits and potential Medicare premiums can reduce your net income.
Calculating the real value of your benefits means accounting for:
- Expected inflation and COLA adjustments
- Healthcare costs and other rising expenses
- Taxes you may owe on your benefits based on your income
How to claim Social Security benefits: A step-by-step guide
Before applying, ensure you’ve paid Social Security taxes for at least ten years and decide on your claim date.5 Then, follow these steps:
- Set up your account
Create a ‘My Social Security’ account to view your earnings and personalized estimates. - Gather necessary documents
You’ll need your Social Security number, birth certificate, W-2s or self-employment tax returns, and bank details for direct deposit. - Application process
Apply online at SSA.gov, call 1-800-772-1213, or visit a local SSA office. An online application is typically the most straightforward. - Monitor your application
After submission, ensure you receive confirmation and monitor status updates.
For more detailed instructions, download the free guide: What Are My Social Security Options?
Break-even calculators
Break-even calculators are also useful starting points to determine how much you would receive, but they should never replace personalized advice. Using your life expectancy, this calculator helps determine the best age to start receiving benefits and whether delaying is worthwhile. Typically, the break-even point is around age 78. Living beyond this age may result in higher total benefits from a delayed start.
The calculators have limitations: They typically churn out estimates based on assumptions and may not account for unexpected events like health changes. There’s no substitute for the personalized guidance of a trusted financial professional.
Smarter Social Security moves start here
Like any personal finance decision, determining when to take Social Security is a deeply personal choice, with no universal rule that applies to everyone. When to claim Social Security benefits can greatly impact your retirement income and peace of mind. Consider your financial resources, work plans, health, and family situation before you decide.
Whatever you do, don’t rely solely on generic advice. Online tools and calculators provide insights, but they can’t account for the nuances of your life. Similarly, the Social Security office provides information but not personalized recommendations.
Consider working with an experienced financial professional who can help you navigate these decisions and maximize your Social Security benefits. They can help you tailor strategies and adjust plans as your life and needs change.
Find a financial professional near you
Frequently Asked Questions
Q1: What is the 10-year rule for Social Security?
The 10-year rule refers to the requirement that you must work and pay Social Security taxes for at least 10 years (or earn 40 work credits) to qualify for retirement benefits. Each year, you can earn up to 4 credits based on your income.
Q2: Do I have to pay tax on my Social Security?
It depends on your combined income, which is your adjusted gross income, nontaxable interest, and half of your Social Security benefits. If that total is over $25,000 for individuals or $32,000 for joint filers, roughly 50–85% of your benefits may be taxable.6
Q3: How long does it take to get your first Social Security check after you apply?
It typically takes about 1 to 3 months to receive your first Social Security check after your application is approved. Payments begin the month after your selected start date.
About Mark Zagurski, CLU®, ChFC®, CMFC® and CRPC®
Mark is a director of strategy and communications at Mutual of Omaha. With more than 30 years of experience, he has worked extensively in advisor development, strategy, and communications, focusing on helping advisors and their clients make informed financial decisions. He is also the host of the Mutual of Omaha Advisors podcast, “Make it Personal,” which explores personal finance and strategies to help you take control of your money and future.
Disclosures:
Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc. Mutual of Omaha Advisors is a division of Mutual of Omaha Insurance Company.
All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.
Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.
Not all Mutual of Omaha agents are registered representatives or financial advisors.
Sources:
- AARP, Securing our future: The importance of Social Security, October 2024
- Social Security Administration, Understanding the Benefits, January 2025
- U.S. News, How to Maximize Social Security With Spousal Benefits, March 2024
- Social Security Administration, Social Security Benefit Amounts
- Social Security Administration, Eligibility for Social Security in retirement
- IRS, Publication 915, 2024
635936_0525
All Categories
Medicare
Retirement Planning
Business Resources
Life Insurance
Financial Planning
Health & Well-Being
Travel & Living