Hello everyone. Kevin here.
Let's talk about a topic that sits at the center of nearly every single retirement conversation: Social Security.
For something so universal, it remains one of the most complex and, frankly, intimidating financial decisions many of us will ever make. It’s a subject layered with rules, acronyms, and "what-ifs" that can make your head spin. And because it involves variables we can't control—like life expectancy, future tax law, and inflation—it’s easy to feel overwhelmed.
Many people approach this decision with a simple "I'll just take it when I stop working" mindset. And while that's certainly one path, it might not be the one that aligns best with your family's broader financial picture.
My goal here is purely educational. I can't and won't tell you what to do. There are no "right" answers or "secret" strategies that apply to everyone. The entire purpose of this post is to walk you through the mechanics of the system—from the absolute basics to the highly advanced rules—so you can be better equipped to ask the right questions. All the technical information here is based on information provided by the Social Security Administration (SSA) and other government sources.
Think of social security planning as building a foundation. You have to understand the materials and the blueprints before you can build the house. We're going to tackle this in three parts: Beginner, Intermediate, and Advanced.
Let's get started.
Part 1: The Foundation — Social Security Fundamentals
Before we can talk about strategy, we have to be fluent in the language. This first section covers the absolute bedrock of the Social Security system. These are the non-negotiable facts and figures you need to know.
What Is Social Security, Really?
At its core, Social Security is a social insurance program. You might hear people talk about it as a "retirement account," but that's not quite right. It's not a private account with your name on it where your contributions grow.
It's a "pay-as-you-go" system. The FICA (Federal Insurance Contributions Act) taxes you pay out of your paycheck today are not being used to save for your retirement; they are being used to pay benefits to current retirees and other beneficiaries. The "promise" is that when it's your turn to retire, future workers will be paying for your benefits.
How Do You Qualify for Benefits?
You don't just automatically get Social Security. You have to pay into the system to become "insured." This is tracked using a "credit" system.
You can earn a maximum of four credits per year.
To qualify for retirement benefits, you need 40 credits, which for most people means 10 years of work.
For most people who have worked and paid FICA taxes for 10 years or more, qualifying is not an issue. This 40-credit history makes you eligible for benefits based on your own work record.
(Source: Social Security Administration, "Social Security Credits")
How Is Your Benefit Amount Calculated?
This is the big one. Your benefit check isn't based on your last few years of work or how much you "need." It's based on a complex calculation of your entire earnings history. The Social Security Administration (SSA) performs a three-step process:
Your 35 Highest-Earning Years: The SSA takes all the income you've paid FICA taxes on throughout your life.
Indexing: The SSA "indexes" your past earnings to account for changes in average wage levels over time. This ensures your future benefits reflect the general rise in the standard of living.
AIME: They take your 35 highest-earning indexed years, add them up, and divide by 420 (the number of months in 35 years). This gives them your Average Indexed Monthly Earnings (AIME).
From your AIME, they apply a formula using "bend points" to calculate your Primary Insurance Amount (PIA).
(Source: Social Security Administration, "Your Retirement Benefit: How It's Figured," Publication No. 05-10070)
The Most Important Acronym: PIA
If you learn only one term, make it PIA, or Primary Insurance Amount.
As the SSA defines it, your PIA is the benefit you are entitled to receive if you file for benefits at your Full Retirement Age (FRA). Everything else in Social Security planning—claiming early, claiming late, spousal benefits—is based on this single PIA number.
The Three Key Ages: 62, FRA, and 70
Your PIA is set, but the amount you actually receive depends on when you choose to claim.
Age 62 (The Earliest): You can begin taking benefits as early as age 62. However, doing so results in a permanent reduction to your benefit. If your Full Retirement Age is 67, claiming at 62 results in a 30% reduction to your monthly benefit.
Full Retirement Age (FRA) (The "Normal" Age): This is the age at which you are entitled to 100% of your PIA. For anyone born in 1960 or later, your FRA is 67.
Age 70 (The Latest): You don't have to claim at your FRA. For every year you delay past your FRA, the SSA gives you "Delayed Retirement Credits." These credits increase your benefit by 8% per year. This stops at age 70. There is no financial benefit to delaying past your 70th birthday.
If your FRA is 67, delaying until 70 would result in a benefit that is 124% of your PIA (8% per year for 3 years). That's a significant difference from the 70% you'd get at 62.
(Source: Social Security Administration, "When To Start Receiving Retirement Benefits," Publication No. 05-10035)
Your "my Social Security" Account
The single most valuable, tangible first step in all of social security planning is to go to SSA.gov and create your "my Social Security" account.
This is not a recommendation; it is simply where your data lives. Your statement will show you:
Your full, year-by-year earnings history (you can check it for errors).
Your estimated PIA.
Estimates of your benefit at age 62, your FRA, and age 70.
Estimates for potential disability or survivor benefits.
This is your personal blueprint. Everything we discuss from here on out becomes much more real when you can apply it to your own estimated numbers.
Part 2: The Intermediate's Playbook — Strategies, Spouses, and Survivors
Okay, you've got the basics. You know what PIA and FRA mean, and you've looked at your statement. Now, the planning really begins. This is where the "simple" act of claiming becomes a complex web of "if-then" scenarios, especially for married couples.
The Math of Early vs. Late Claiming
Let's unpack the numbers from Part 1. The decision to claim early, at FRA, or late is often framed as a "breakeven" analysis.
A breakeven analysis is a simple calculation. It asks: At what age will the total, cumulative dollars I receive from delaying surpass the total dollars I would have received from claiming early?
Example (Simplified): If you claim early (e.g., at 62), you get smaller checks but for a longer period. If you claim late (e.g., at 70), you get much larger checks but for a shorter period. The "breakeven" age is the point where the person who waited overtakes the early-claimer in total lifetime benefits. This age is often somewhere in the late 70s or early 80s.
Here's the problem: This analysis is based on one variable you cannot know: your longevity. It also doesn't account for taxes, inflation (though benefits are cost-of-living-adjusted), or what you might do with the money in the meantime (e.g., does claiming early prevent you from drawing down an investment account?).
There is no "right" answer. It's a personal consideration of factors like your health, your family's longevity, your cash flow needs, and your spouse's situation.
Spousal Benefits: The "Two-for-One" Consideration
This is where planning for married couples gets complicated and critically important. Your work record doesn't just create a benefit for you; it can also create one for your spouse.
Here are the core rules:
The 50% Rule: A spouse is potentially eligible for a benefit up to 50% of the primary worker's PIA (their full retirement age benefit).
Higher-Of: A person always gets their own benefit first. If their own benefit (based on their 40+ credits) is higher than the 50% spousal benefit, they just get their own. They don't get both. If the spousal benefit is higher, the SSA will pay them their own benefit plus an amount to "top them up" to the higher spousal amount.
Claiming Reduces It: The 50% amount is only available if the spouse claims it at their Full Retirement Age. If they claim the spousal benefit early, that 50% is permanently reduced.
The Primary Worker Must File: To "unlock" a spousal benefit for their partner, the primary worker must have filed for their own benefit.
(Source: Social Security Administration, "Benefits for Your Spouse")
This creates complex claiming scenarios. For instance, it may be a consideration for the higher-earning spouse to delay claiming until 70. This not only maximizes their own benefit but also maximizes the survivor benefit for their partner (more on that next).
"Deemed Filing" — A Critical Modern Rule
In the past, there were strategies where a person at FRA could file only for a spousal benefit and let their own benefit keep growing until 70.
That option is gone. A rule called "Deemed Filing" now applies to everyone born after January 1, 1954. This rule states that when you file for any benefit (your own or spousal), you are "deemed" to be filing for all benefits you are eligible for. The SSA will simply look at all available options and pay you the highest one. You can no longer pick and choose.
(Source: Social Security Administration, "Deemed Filing for Spouses")
Survivor Benefits: The Most Important Benefit
This is, in my opinion, the most critical and least-understood part of Social Security. It is fundamentally different from a spousal benefit.
When one spouse passes away, the surviving spouse is eligible for a survivor benefit.
How much is it? It is worth up to 100% of what the deceased spouse was receiving (or was entitled to receive at their death).
The "Higher-Of" Rule: The surviving spouse will receive either their own benefit or the survivor benefit—whichever one is higher. They do not get both added together.
Impact of Delaying: This is why a high-earner delaying their benefit until 70 can be so powerful. If the higher-earning spouse delays to 70 and then passes away, their partner (the survivor) can step into that maximized, 70-year-old benefit for the rest of their life. That 8%-per-year growth becomes a permanent gift to the surviving spouse.
Different Rules: Deemed filing does not apply to survivor benefits in the same way. A widow or widower can, for example, choose to take the survivor benefit first (as early as 60) while letting their own retirement benefit grow until 70, at which point they can switch to their own (if it's higher).
(Source: Social Security Administration, "Survivors Planner: If You Are The Worker's Widow Or Widower")
The coordination of spousal and survivor benefits is a cornerstone of good social security planning, and it's a primary reason people engage a financial advisor or wealth manager—to model the different lifetime outcomes for the household, not just the individual.
Part 3: The Advanced Course — Taxes, Work, and Complex Rules
If you've followed along this far, you're already in the top percentile of knowledge. This is where we get into the fine print. These advanced topics are where a simple plan can be optimized... or derailed.
The Tax Torpedo: How Benefits Are Taxed
Yes, Social Security benefits can be taxable. This is often a very unpleasant surprise for new retirees. Whether your benefits are taxed depends on your "Provisional Income" (also called "Combined Income" by the SSA).
The formula, as defined by the IRS, is: Your Adjusted Gross Income (AGI) + 50% of your Social Security Benefit + Any Non-Taxable Interest (like from municipal bonds)
Once you have that number, you compare it to two federal thresholds:
For Individuals:
$25,000 - $34,000: Up to 50% of your benefits may be taxable.
Over $34,000: Up to 85% of your benefits may be taxable.
For Married Couples Filing Jointly:
$32,000 - $44,000: Up to 50% of your benefits may be taxable.
Over $44,000: Up to 85% of your benefits may be taxable.
Note: These thresholds are not indexed for inflation, so more and more retirees find themselves paying tax on their benefits each year. The term "up to 85% taxable" does not mean you pay an 85% tax rate. It means that 85 cents of every Social Security dollar is added to your taxable income and then taxed at your ordinary income tax rate.
(Source: Internal Revenue Service, "Topic No. 423, Social Security and Equivalent Railroad Retirement Benefits" & SSA, "Income Taxes And Your Social Security Benefit," Publication No. 05-10035)
The Annual Earnings Test (Working While Claiming)
This rule trips up everyone. People often ask, "Can I work and collect Social Security at the same time?"
The answer is: Yes, but it depends on your age.
If you are AT or PAST your Full Retirement Age (FRA): Yes. You can earn an unlimited amount of money from a job, and it will not affect your Social Security benefit check at all.
If you are BELOW your Full Retirement Age: This is where the Annual Earnings Test comes in. If you claim benefits before your FRA and continue to work, your benefits can be temporarily withheld.
In the years before you reach FRA: The SSA withholds $1 in benefits for every $2 you earn above an annual limit (in 2024, that limit is $22,320).
In the year you reach FRA: The limit is much higher (in 2024, $59,520), and the withholding is $1 for every $3 you earn above it (and this only applies to the months before your birthday).
This money is not "lost" forever. When you eventually reach your FRA, the SSA will recalculate your benefit and give you credit for all the months they withheld payments. Your monthly check will be permanently increased.
(Source: Social Security Administration, "How Work Affects Your Benefits," Publication No. 05-10069)
Advanced Scenarios: Divorced-Spouse Benefits
The rules for spousal and survivor benefits don't just apply to current marriages. A divorced individual may be entitled to benefits based on their ex-spouse's record.
The key rules are:
The marriage must have lasted 10 years or more.
You must be currently unmarried.
You must be 62 or older.
Your ex-spouse must be entitled to benefits.
A key point: Your claiming a benefit on your ex-spouse's record has zero impact on their benefit or the benefit of their new spouse.
(Source: Social Security Administration, "Benefits For Your Divorced Spouse")
Advanced Scenarios: WEP and GPO
This is arguably the most complex and specialized area. If you or your spouse worked for a government entity—like a state, county, or local school district—where you did not pay FICA taxes, you must be aware of two provisions:
Windfall Elimination Provision (WEP): This rule can reduce your own Social Security retirement benefit. It exists to prevent someone who gets a "non-covered" pension from also getting the full benefit of the progressive Social Security formula.
Government Pension Offset (GPO): This rule can reduce or completely eliminate your spousal or survivor benefit. The rule of thumb is that it will reduce your spousal/survivor benefit by two-thirds of the amount of your non-covered pension.
(Source: Social Security Administration, "Windfall Elimination Provision," Publication No. 05-10045 & "Government Pension Offset," Publication No. 05-10007)
Putting the Pieces Together
If you've made it this far, congratulations. You've just completed a crash course that covers the vast majority of Social Security planning.
You can see now why it's not a simple decision. It's a deeply personal one. The "best" choice for you depends on your health, your family, your other assets, your retirement goals, and your view on taxes.
Our job as financial professionals isn't to give you the answer. It's to help you understand the consequences of your choices. A financial advisor or wealth manager can help you model these scenarios:
"What does our retirement cash flow look like if we both claim at 62?"
"What does it look like if the high-earner delays to 70 and the other claims a spousal benefit at 67?"
"How does taking from my 401(k) first impact the taxation of my benefits later?"
The goal of all social security planning is to use this benefit—one you've earned over a lifetime of work—in the most intentional and efficient way possible to support your retirement.
I hope this has been helpful in demystifying the system and, most importantly, in helping you figure out the next question to ask.