5 factors to consider when planning for Social Security


Nearly all Americans (if you paid in during your working years) will receive Social Security payments at some point in their lives. In fact, according to the Social Security Administration, 9 out of 10 individuals 65 and older receive Social Security benefits. A study by the Social Security Administration also revealed that in 2014:  

  • 52% of married couples and 74% of unmarried persons received 50% or more of their income in retirement from Social Security, and;
  • 22% of married couples and approximately 47% of unmarried persons relied on Social Security for 90% or more of their income.

There are an infinite number of ways that you can approach taking your Social Security benefits. As you begin planning how to maximize your benefits, there are a number of important questions you will want answered and factors to take into consideration.

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5 questions to ask yourself about Social Security

  1. Would it be beneficial to seek the advice of a financial advisor?  With more than 2,700 rules that govern how much individuals are entitled to receive from their Social Security, there is bound to be a great deal confusion over how to file and when to file. On top of the 2,700 rules, there are over 8,000 ways for a married couple to file. Because of the complex nature of Social Security, strategizing with your financial planner may be the best way to optimize your benefits and help you create the most robust retirement plan possible.   
  2. What are the maximum payable benefits and average monthly benefits?  The maximum benefit you can receive depends on the age you retire.  In 2015, retiring at full retirement age means receiving a maximum benefit of $2,663.  Retiring early at 62 means receiving a maximum benefit of $2,025, and retiring at 70 means receiving a maximum benefit of $3,501. 
  3. Should I take Social Security early?  There are plenty of people out there that don’t want to wait beyond 62 to take Social Security. Whether or not you should start taking Social Security early depends on your own set of personal circumstances, but you’ll want to be aware of the penalties involved. If 62 is a full three years before your full retirement age, you will be penalized by having your benefits permanently reduced by five-ninths of 1% each month. If you start taking Social Security benefits over three years before your full retirement age, your benefits will be reduced further by five-twelfths of 1% each month.

While taking Social Security benefits early is not the optimal decision for a large number of people, it could be right for you. If you are concerned that the Social Security system is on the brink and don’t want to take any chances, taking your benefits now might be the right choice. Or, if your retirement plan is already full with a healthy 401(k), IRA and other assets, and your Social Security benefits don’t carry too much weight, it might not benefit you too much to wait.    

  1. What can I expect if I delay my Social Security benefits?  Delaying your Social Security benefits can produce a number of positive outcomes. For example, if you delay your benefits and you are between your full retirement age and 70, you’ll be credited and therefore increase your Social Security income. If your full retirement age is 66, but you wait to receive benefits until you’re 68, you can get a credit of 8% per year multiplied by two (the number of years you waited). This makes your benefits 16% higher than what they would have been if you received benefits at 66.

Delaying your benefits will mean fewer monthly checks, but the checks could be bigger. Two important factors to consider are what you plan to do with your benefits and the state of your health. If you’re hoping Social Security will supplement big, adventurous vacations, you might not want to wait too long to receive them. But if you’re comfortable delaying your benefits to have adequate resources to attend to medical issues, or you want to build up your portfolio for your loved ones, then this might be the best choice for you.

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  1. What happens if I earn additional income after retirement?  The Social Security Administration reviews the records for all working Social Security beneficiaries to see if any potential earnings may increase benefits. If they do, a new benefit amount is figured and paid in January of the following year.

If Social Security is going to be one of your main income streams in retirement, it is essential to maximize your benefits. Unfortunately, there is no one calculator or tool that can give you the perfect date for when and how to take your Social Security; nor is there an algorithm or a person that can tell you exactly how long you’ll live or if you will be faced with health concerns.

It’s always a good idea to speak with a trusted financial advisor that can help you think through your questions and plan out your retirement. There’s also a great new tool that can help you figure out how to maximize your filing strategy called the Social Security Optimizer. (Full disclosure: I work for Capital Investment Advisors, the company that hosts this calculator.) By inputting your own parameters to create scenarios that reflect your lifestyle and events, the Social Security Optimizer can help you understand which path would fully maximize how much money you will receive from the Social Security system that is currently in place.   

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For more money-saving advice, see our Money section.


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