social security planning Arizona

Optimizing Social Security Income

Many Americans count on Social Security as a substantial source of income in retirement. But, most people do not understand the guidelines surrounding these benefits. So, they may claim their benefits at a time that’s detrimental for their circumstances, eventually losing money in the process.


Claiming early

With these rules, it may seem obvious to delay your retirement benefits, that is not a realistic option for everyone. Your health & how long you live are the main factors in deciding how much money you’ll need in retirement. If you are treating a chronic condition and have a shorter life expectancy than average, it may be wise to choose the support of early Social Security payments. Likewise, if you absolutely need the income, Social Security can be a much-needed safety net.


Full retirement age

To begin planning your strategy when to claim benefits, you’ll first need to determine your full retirement age (FRA) as designated by the Social Security Administration (SSA). If you were born in 1960 or later, your FRA is 67. If you were born before 1960, your FRA falls between 65 and 66, depending on the specific year you were born. Although you’re permitted to start claiming Social Security benefits as early as age 62, you will not receive full monthly benefits unless you wait until your FRA to claim them.

Claiming benefits early can mean losing out on hundreds of dollars a month, which will add up if you decide to begin the process several years earlier than you should.

If you delay Social Security past your FRA, your benefits can increase by 8% each year until age 70. For example, if your FRA is 67 and you wait until 70 to claim Social Security, you’ll increase your monthly benefits by 24 percent. Some retirees, are enticed to receive their benefits early and reinvest them; however, other investments may not produce returns large enough to beat the guaranteed 8% annual growth in delaying Social Security. Though, if you’re in excellent health & believe you will live well into your 80’s, it may be prudent to increase your benefit by delaying your claim as long as possible (up to age 70).


Coordinating with your spouse

If you’re married, your Social Security strategy should also take your spouse’s benefits into consideration. For instance, you may decide that the lower-earning spouse should claim benefits at full retirement age for cash flow reasons, while the higher-earning spouse’s benefits grow until age 70.

Ultimately, to optimize Social Security benefits you need to find the sweet spot—the point at which the higher monthly benefits you’d gain by waiting to claim to exceed the amount of money you’ll miss by not claiming early. For many people, that means delaying claiming Social Security as long as possible.


Consult your financial professional at Wealthnest Planners for assistance in determining what retirement income options can support your unique circumstances.