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Claiming your Social Security benefits is one of the most important decisions you can make in retirement. It’s a decision that lasts the rest of your life, with little room for do-overs.
It’s not just the regret of making a poor choice with your hard-earned Social Security that could cost you, but it’s real dollars at stake.
A 2022 study by Larry Kotlikoff estimates the average couple misses out on $182,370 over their lifetimes because of poor Social Security decisions.
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Before you get ready to file for Social Security, make sure you’ve made all five of these smart moves so you can make the best decisions for you (and your spouse).
1. Verify your earnings record
Your Social Security benefit is based on your top 35 years’ earnings. It’s your money, but Social Security makes the calculation, and you’ll want to make sure they got their math correct.
Before you file, log in to SSA.gov to review your full earnings record. You should be able to see every single year of your Social Security and Medicare earnings. Your Social Security earnings may be less than your Medicare earnings if you maxed out the Social Security wage limit for that year.
While your earnings record is most likely correct, if you notice a discrepancy, or have a question, contact Social Security right away so you get the Social Security benefit you deserve.
2. Estimate your benefit with the retirement calculator, not your Social Security Statement
Most people log in to Social Security, click on their Social Security Statement and base their retirement projections on their age-62-to-70 benefit amounts listed there — especially their full retirement age (FRA) estimate.
These age-62-to-70 estimates on your statement are based on assumptions that Social Security makes — assuming you keep earning last year’s reported income until the specific year you start your benefit.
If you plan to retire at 60, and you’re basing your estimates on your age 67 FRA amount shown on your statement, that estimate is based on seven years of earnings you don’t plan to have.
With Social Security’s benefit formula being based on the top 35 years’ worth of earnings, that seven years of missing earnings could mean your actual benefit is 20% lower than the estimate on your statement.
That’s where the retirement calculator comes in. You can use it to plug in assumptions based on your planned retirement dates.
It will already have last year’s earnings plugged in, assume you retire at your FRA (67 for anyone born 1960 or later) and show your benefit at an early retirement date, your FRA and the delayed benefit at the maximum age of 70.
Most people move their retirement age around, from ages 62 to 70, to see how their benefit changes. I’d encourage you instead to start with changing your average future annual salary that goes into the estimate.
3. Discover how much Social Security benefit you’ve already earned
First, make note of your FRA amount with the assumptions already in the calculator.
Then change your average future annual salary estimate to $0.
Which sounds odd — why would you assume no future earnings when you’re still planning to work?
With no future earnings going into the estimated retirement benefit, the calculator will then show you how much Social Security benefit you’ve already earned from all your past earnings.
I call it your vested Social Security benefit, because it’s the amount you’ve earned even if you never work another day in your life.
It’s important to know both how much Social Security you’ve earned and the difference between that amount and Social Security’s default assumption that you’ll keep making last year’s earnings until your FRA.
While it’s not exact, if the difference is $300 a month and you have 10 years until your FRA, then, roughly speaking, every year you keep working adds only $30 a month to your future Social Security benefit amount.
I’ve seen differences between the vested amount and the estimated benefit that equate to just $1 to $2 more per month in Social Security benefits for working another 10 years.
Learning how much each additional year of working will grow your Social Security benefit, or not, will be helpful as you determine your planned retirement age.
4. Understand your longevity before you make your Social Security decision
People often say to me, “Delaying Social Security has a break-even age of 77. What are the odds I’ll make it to that age?”
Then they shrug as if it’s impossible to know the odds. My response is always, “Let’s go find those odds.”
Your decision on when to take Social Security is basically a bet on how long you, and/or your spouse, might live.
Unlike in a Vegas casino, where they know all the odds and tilt them in their favor, you can walk into the Social Security office knowing more about your odds than “the house” and you can tilt your Social Security bet in your favor — if you bother to take five minutes to learn your odds.
I’ve found that Longevityillustrator.org is the quickest, easiest way to get both your longevity estimate and your actual odds of making it to certain ages.
Within five minutes, you’ll have accurate estimates based on your age, gender, smoker status and general health level.
While you may be focused on your individual life expectancy and that of your spouse if you’re married, I’d encourage you to pay special attention to two specific areas in the report.
The first is the section titled “Probability of Living at Least a Specified Number of Years After Retirement.” When you’re wondering, “What are the odds of making it past the Social Security break-even age,” this section will tell you.
The second only applies if you’re married. Check the life expectancy for you as a couple, which is not your life expectancy or their life expectancy, but the 50% probability that either of you makes it to a certain age.
You’ll notice that it’s a number that’s likely four to five years higher than either of your individual life expectancies.
I explain it this way: If your life expectancy is the 50% chance that you’ll make it to a certain age, then — on average — one of you will pass before that age and one of you will make it past that age.
Finding the joint life expectancy is vital for making the decision on when to file for the higher benefit in a couple. It’s this benefit that will go on to the surviving spouse. It’s this benefit that will last the longest, and you need to know how long that benefit might last.
5. Follow the math to file for Social Security at the right time
Chances are you’ve already plugged your Social Security estimate into a spreadsheet and calculated how it changes if you file before, or after your FRA.
You probably have a formula calculated that shows you the break-even age or even the difference between filing early and investing your Social Security benefit vs allowing your benefit to grow by delaying.
Following the math that you found in the first four smart moves isn’t about adding numbers. It’s about having the right approach to your Social Security decision.
The first part of the approach is coordinating your Social Security decision with how it affects your taxes, your investments, your surviving spouse and the size of your future estate.
The key is not to solve the Social Security decision. The key is to solve how your Social Security decision fits into your retirement planning puzzle.
I go into more detail on the step-by-step process I use to solve the retirement planning puzzle in my book Retire Today, where I walk through coordinating your spending needs, Social Security, tax planning, investment and legacy decisions.
The second part of taking the right approach is to determine what you are solving. Most people create their spreadsheets in a way that solves for getting the most out of Social Security.
That’s a worthy goal — you’ve paid into it your whole working career. But instead of solving for the highest dollar amount on your spreadsheet, I suggest you approach your decision based on the official name of the Social Security program.
Old-Age and Survivors Insurance
- Social Security is there to help you in your old age
- Social Security is there to help your survivor
- Social Security is there as insurance, in case the inflation, investment or longevity estimates you make in your retirement planning don’t turn out the way you hoped
Learn the math. Do the math. Follow the math.
Only then will you feel certain your Social Security decision is the best for you.
