Many people know they’ll collect Social Security at some point. Far fewer realize that when they claim can mean a difference of six figures in lifetime benefits. This can be one of the most consequential financial decisions you’ll make in retirement, and it can mean a difference of $100,000 or more depending on your health, income needs, and retirement strategy.
We sat down with Luke LaRock, NSSA® (National Social Security Advisor), Wealth Advisor at Pinnacle Wealth, to break down everything you need to know ahead of time.
What Are Your Claiming Options?
Social Security retirement benefits can be claimed as early as age 62 or as late as age 70. The age you choose locks in your monthly benefit amount permanently. Here’s how it works:
- Claim at 62: You receive reduced benefits, which can be up to 30% less than your full amount.
- Claim at 67, Full Retirement Age (FRA): You receive 100% of your earned benefit.
- Claim at 70: You receive your maximum benefit, which is roughly 24% more than at FRA.
Many people don’t realize how permanent this decision is. Once you start collecting, that reduced amount follows you for the rest of your life.
Why Waiting Often Pays Off
For every year you delay claiming past your full retirement age, your benefit grows by 8% of your FRA amount. That’s a guaranteed return most investments can’t reliably match. Think of it like a raise you give yourself for waiting. If your full benefit is $2,000 a month at 67, waiting until 70 brings that to roughly $2,480 every single month, for life.
Over a 20-year retirement, that gap can add up quickly. The math often favors delaying, especially for people in good health. Luke agrees: “Statistically, waiting often wins.”
When Claiming Early Makes Sense
Delaying isn’t the right move for everyone. There are real situations where taking benefits sooner may be the smarter choice. Consider claiming earlier if:
- You have significant health concerns or a shorter life expectancy.
- You need the income to cover essential expenses.
- You’ve already retired and have no other income sources.
Health Insurance Considerations
Claiming early does have other financial considerations, however, including its effect on health insurance.
Luke states: “Medicare starts at 65, not 62. If you retire early, you’re fully responsible for health insurance during that three-year window, and COBRA could run $1,500 to $2,000 a month for a family. That number needs to be in your budget before you make any decision about early retirement.”
The Break-Even Point
A “break-even point” is the age at which delaying your claim actually starts to pay off more than claiming early. For most people, this falls somewhere in the low 80s.
- If you live past your break-even age, delaying could be seen as the smarter move.
- If you don’t reach it, claiming early would net you more.
No one can predict the future, but understanding this helps frame the decision clearly. “The break-even point is a starting point from where we can start to think about the conversation, not the finish line,” says Luke. “A dollar at 63 when you’re healthy and active is different than a dollar at 83.”
The Married Couple Strategy
For married couples, Social Security timing becomes even more strategic. The higher-earning spouse’s benefit affects the surviving spouse’s income for the rest of their life.
“The biggest thing I want couples to understand is the survivor benefit. When one spouse passes, the surviving spouse keeps the higher of the two benefits,” Luke notes. “So if the higher earner delays to age 70 and locks in that larger benefit, they’re not just maximizing their own monthly check, but they’re setting a higher floor for their spouse potentially for decades.”
Taxes and Social Security
Many retirees are surprised to learn that Social Security benefits can be taxable. Up to 85% of your benefit may be subject to federal income tax, depending on your total income in retirement.
- Combined Income Under $25,000 (single) or $32,000 (married): Benefits are generally not taxed.
- Combined Income Over $34,000 (single) or $44,000 (married): Up to 85% of benefits may be taxable.
This is why you should look at Social Security as part of the whole picture, not just in isolation. Your IRA withdrawals, investment income, and part-time work all affect how much of your benefit gets taxed.
Don’t Make This Decision Alone
Social Security rules are complicated. There are more than 2,700 rules governing benefits, and the wrong choice is hard or even impossible to undo. Luke has the NSSA® designation specifically because this topic deserves that level of knowledge. A one-hour conversation before you claim can literally be worth six figures over your lifetime.
The best time to think about this is well before you’re ready to claim. Reach out to Luke or a member of the Pinnacle Wealth team to help run your personalized Social Security analysis today.
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