Fedak Financial Planning

When Should You Take Social Security?

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Is Social Security Going Away?

Before getting into claiming strategies, it’s worth addressing something many people worry about.

“Will Social Security even be there when I retire?”

You’ll often hear alarming headlines suggesting the system is running out of money. That understandably creates anxiety.

The reality is more nuanced.

Social Security does face long-term funding challenges, but the idea that the system will simply disappear is extremely unlikely.

To understand why the system is under pressure, it helps to look at two major factors.

Changing Demographics

Social Security is funded primarily through payroll taxes from today’s workers.

For many decades, the system had a very favorable demographic structure. There were many workers paying into the system for every retiree receiving benefits.

Over time, that balance has shifted.

Americans are living longer, and the large Baby Boomer generation is now moving into retirement. At the same time, birth rates have declined, meaning fewer workers are paying into the system relative to the number of people receiving benefits.

This shift in demographics puts pressure on the program’s finances.

Expansion of Benefits Over Time

Another factor is that Social Security benefits have gradually expanded over the decades.

Changes such as cost-of-living adjustments, expanded eligibility, and other policy adjustments have made the program more generous than it was originally designed to be.

These expansions have improved retirement security for millions of Americans, but they have also increased the long-term cost of the system.

What Is Most Likely to Happen

Because Social Security is such a critical part of retirement income for millions of Americans, policymakers are far more likely to adjust the system than eliminate it.

Commonly discussed changes include:

Gradually increasing the full retirement age
Adjusting payroll tax rates/wage limits (I believe the best approach is to get rid of the upper wage limit altogether)
Modifying benefits for higher-income households

Benefit reductions are possible if no reforms occur (this would be unwise, and very unpopular), but the idea that Social Security will simply vanish is extremely unlikely.

For people approaching retirement today, Social Security will almost certainly remain an important part of the retirement income picture.

The Three Ages That Matter

When it comes to Social Security, three ages drive most of the decision.

Age 62 This is the earliest age you can begin receiving benefits in normal circumstances. If you claim this early, your benefit is permanently reduced (to the tune of 30% reduction! No bueno!).

Full Retirement Age (67 for people born in 1960 or later). This is the age at which you are entitled to receive 100% of your Social Security benefit.

Age 70 If you delay benefits past full retirement age, your benefit increases about 8% per year until age 70. After age 70, there is no additional increase for waiting.

So the basic trade-off looks like this:

Claim early → smaller checks for more years. Claim later → larger checks for fewer years

Understanding the Break-Even Point

A helpful way to think about the decision is the break-even age.

The break-even point is the age where the total income received from claiming early equals the total income from claiming later.

For example, imagine someone whose benefit is:

$2,000 per month at age 67
About $1,400 per month at age 62

The person who claims at 62 receives five extra years of payments. Early on, they come out ahead.

But the person who waits receives larger monthly payments for the rest of their life.

Eventually, those larger payments catch up.

For many people, the break-even point between claiming at 62 and claiming at full retirement age falls somewhere around age 79 or 80.

If someone lives well beyond that age, delaying benefits may produce more total lifetime income.

But the break-even point is only one piece of the puzzle.

Longevity and Health Matter

One of the most important factors in deciding when to claim Social Security is longevity.

Simply put, the longer you live, the more valuable a larger Social Security benefit becomes.

Social Security functions much like an inflation-adjusted lifetime annuity, meaning it provides income for as long as you live.

Because of that, delaying benefits can act as a form of insurance against living a long life.

Health and family history should be part of the decision. Some factors to consider include:

Your current health
Family longevity patterns
Lifestyle habits
Access to healthcare

Someone in excellent health with a family history of long life may lean toward delaying benefits. Someone facing serious health concerns may reasonably choose to claim earlier.

None of us knows exactly how long we will live, which is why this decision deserves thoughtful planning.

Social Security Is Only One Piece of the Plan

Another important point is that Social Security should not be viewed in isolation.

The right claiming strategy often depends on other sources of retirement income, such as:

Pension income
Investment accounts
Retirement plans such as 401(k)s and IRAs
Brokerage accounts
Annuities
Insurance payments
Rental income or other passive income

Someone with a strong pension and significant savings should choose to delay Social Security to increase guaranteed income later in life.

Someone with limited retirement assets may need to begin benefits earlier to help cover living expenses.

Every retirement plan is different.

Strategies Couples Often Consider

For married couples, Social Security decisions become more strategic because two benefits are involved.

Instead of looking at each person individually, couples often coordinate their claiming strategy.

One Spouse Claims Early, the Other Delays

One spouse begins benefits around age 62 while the other delays until full retirement age or later.

This allows the household to receive income earlier while still increasing one benefit for later years.

Both Spouses Claim at Full Retirement Age

Some couples prefer a balanced approach.

Both spouses claim at full retirement age, around age 67. This avoids the permanent reduction from claiming early while still beginning benefits earlier than age 70.

One Spouse at FRA, the Higher Earner Waits Until 70

In many cases, the lower-earning spouse claims at full retirement age while the higher-earning spouse delays until age 70.

This approach can be particularly helpful for survivor planning.

When one spouse passes away, the surviving spouse receives the larger of the two benefits. Delaying the higher earner’s benefit can therefore increase the income available to the surviving spouse later in life.

The Simple Truth About Social Security Timing

You’ll often hear simple rules like:

“Always claim at 62.”

“Always wait until 70.”

But retirement decisions rarely fit neatly into rules like that.

The right time to claim Social Security usually depends on a few key factors:

Your health and longevity expectations
Your retirement savings and investments
Other sources of income such as pensions or annuities
Your spouse’s benefits and survivor planning
Your retirement spending needs

Social Security is one of the most valuable retirement benefits many people have. For married couples especially, the difference between claiming strategies can add up to tens or even hundreds of thousands of dollars over a lifetime.

Taking the time to evaluate the decision carefully can make a meaningful difference in retirement.

If you’re approaching retirement and want help evaluating how Social Security fits into your broader retirement plan, or if you have any other questions or circumstances requiring expert knowledge, please feel free to reach out and contact me at https://fedakfinancialplanning.com.