Social Security is undeniably an important part of planning for retirement as it provides people with financial security. According to Scott Tominaga, even though Social Security is commonly perceived by many as another kind of government benefit, the interplay in planning future income by how they claim Social Security can be important, too. The choice of when to claim Social Security and how to coordinate could be the difference between maximizing the benefits to the recipient and failing to maximize the outcome.
Time and Social Security Benefit – How Related
Notably, time is the most important thing for maximizing one’s Social Security benefits. Simply put, the scheme allows entitled individuals to start claiming benefits as early as they reach the age of 62. However, claiming benefits so early translates into a reduced monthly payment of 30% less than they would have received by waiting until their full retirement age (FRA), varying between ages 66 and 67 based on one’s year of birth. On the contrary, waiting until 70 and claiming delayed benefits from the FRA will help get higher monthly payouts due to deferred retirement credits, which can be as much as an 8% increase for each year of delaying.
Knowing About Full Retirement Age (FRA)
Knowing one’s FRA is important. It is the age at which one becomes eligible for the maximum (100%) Social Security benefit. Making a claim before reaching the age will lead to a perpetual reduction of monthly benefits for life. However, claiming upon reaching the age will yield a higher monthly income, totaling a considerable amount. According to Tominaga, entitled individuals need to determine whether they should claim early or delay their claim, considering their present health condition, life expectancy, and need for earning.
For individuals with sound health conditions and longevity in their family history, postponing benefits generally makes a smart choice. However, those with health issues or urgent financial requirements may prefer to take it earlier. There is no one-size-fits-all solution for this, while individual situations need to dictate the choice.
Spousal and Survivor Benefits: Coordination is Key
Married couples also have other strategies to take into consideration. Spouses are allowed to receive a maximum of 50% of their spouse’s benefit, should it be greater than their own. Coordinating claims can result in greater overall household income over the long run.
For instance, one partner may postpone his/her benefit to allow for maximum delayed credits, whereas the other will start claiming sooner. When there is a significant difference in the income between spouses, it is prudent for the higher-earning partner to postpone benefits so that the surviving spouse gets a greater survivor benefit as per Scott Tominaga.
Survivor benefits can also be claimed based on the deceased spouse’s benefit amount. Widows and widowers should be aware that they can claim survivor benefits independently of their own retirement benefits.
Working After Availing Social Security: The Earnings Limit
Those who opt for Social Security benefits before FRA but continue to work should know the earnings limit. For instance, in 2025, earning more than $22,320 means $1 is taken back for every $2 in earnings over the cap. However, lost benefits are not meant to be forever. When FRA is attained, the benefit is then recalculated to include the amount taken back, possibly adding to future payments. For retirees who expect to work beyond retirement age, postponement of benefits can avoid shortfalls and result in greater overall benefits.
Make Informed Decisions
Eventually, maximizing Social Security benefits involves meticulous planning and weighing personal objectives, financial requirements, and health conditions. Meeting with a financial advisor like Scott Tominaga or using resources such as the Social Security Administration’s online calculator can be helpful to get personalized guidance.
To conclude, instead of thinking of Social Security as a static figure, it needs to be viewed as a flexible retirement scheme. With proper planning, individuals can reap the most of their benefits, not only for themselves, but equally for their spouses and families, too.