Guide to Maximizing Social Security

When should you start collecting Social Security?

It's one of the most important financial decisions you'll make as you approach retirement. It's also a decision that is frequently evaluated from only one perspective: how to receive the largest possible monthly benefit.

Conventional retirement planning often emphasizes delaying Social Security until age 70. By waiting, retirees can receive a larger monthly benefit for the rest of their lives.

But is receiving the largest Social Security check always the best financial decision?

Not necessarily.

For individuals who have spent decades accumulating retirement savings, there's another important consideration: What happens to your investment portfolio while you're waiting to collect Social Security?

If you retire before age 70 and delay claiming benefits, you may need to withdraw more money from your IRAs, 401(k)s, and other investment accounts to support your lifestyle.

Those withdrawals reduce the amount of money remaining in your portfolio, potentially limiting future investment growth and affecting your long-term financial flexibility.

Claiming Social Security earlier may allow you to reduce those withdrawals and preserve more of your investments during the early years of retirement.

The goal of retirement planning shouldn't simply be to maximize your Social Security benefit. It should be to make the most of your Social Security benefits and retirement savings together.

The Traditional Argument for Waiting

Social Security retirement benefits can generally begin as early as age 62. However, claiming before your full retirement age permanently reduces your monthly benefit compared with waiting until full retirement age.

Conversely, delaying benefits beyond full retirement age increases your monthly payment through delayed retirement credits, up to age 70.

For someone whose full retirement age is 67, claiming at 62 generally produces a benefit 30% lower than their full retirement age amount, while waiting until 70 generally produces a benefit 24% higher.

This creates a compelling argument for delaying benefits, particularly for individuals who expect to live well into their 80s or 90s.

A larger Social Security benefit can provide greater guaranteed lifetime income, additional protection against longevity risk, and potentially higher survivor benefits for a spouse.

These are meaningful advantages.

However, this analysis often focuses primarily on Social Security payments rather than the impact that delaying benefits may have on the rest of your retirement assets.

A larger monthly Social Security benefit is valuable, but it doesn't automatically mean you'll have more wealth or greater financial flexibility throughout retirement.

The Other Side of the Equation: Your Retirement Portfolio

Imagine retiring at age 62 with $1.5 million in retirement savings.

You've worked hard to accumulate those assets, and now they need to provide income for potentially 25 to 35 years.

If you delay Social Security until age 70, your investment portfolio may need to provide most or all of your retirement income during those eight years.

But if you begin collecting Social Security at 62, those benefits can help cover your living expenses immediately.

That could mean fewer withdrawals from your investment accounts, more assets remaining invested, and potentially greater flexibility during periods of market volatility.

Of course, the comparison changes after age 70. Someone who delayed Social Security would then receive larger monthly payments and might need to withdraw less from their portfolio in later years.

That's why it's important to evaluate both strategies over an entire retirement rather than looking at the first eight years alone.

Claiming Social Security earlier may help preserve investment assets when you first retire, while delaying may provide greater income protection later in life. The best choice depends on how those benefits work alongside your retirement portfolio.

A Different Way to Think About Maximizing Social Security

Instead of asking only, "How can I get the largest Social Security benefit?" consider asking:

• How much will I need to withdraw from my investments if I delay Social Security?

• Could claiming earlier help reduce withdrawals during a market downturn?

• What might happen to my investment portfolio if I live to age 80, 85, 90, or beyond?

• How would my claiming decision affect my spouse's retirement income and potential survivor benefits?

• Could different claiming ages create opportunities for more effective tax planning?

• Which strategy provides the best balance of retirement income, financial flexibility, and legacy planning?

These are the questions that turn a Social Security claiming decision into a comprehensive retirement income strategy.

For some retirees, delaying Social Security until age 70 will be the appropriate decision. For others, claiming earlier may better support their financial goals.

The important distinction is that maximizing Social Security benefits and maximizing your overall retirement outcome are not necessarily the same thing.

Looking Beyond the Monthly Benefit

Throughout this guide, we'll explore how Social Security claiming decisions affect more than the size of your monthly check.

We'll examine the advantages and disadvantages of claiming at different ages, the relationship between Social Security and investment withdrawals, the impact of market volatility, and important considerations involving taxes, married couples, and longevity.

We'll also compare hypothetical retirement scenarios to illustrate how different claiming strategies may affect portfolio balances and retirement income over time.

The objective isn't to convince every retiree to claim Social Security at age 62. It's to challenge the assumption that waiting until age 70 is automatically the best decision.

Social Security should be coordinated with your retirement savings, not evaluated separately from them. The right strategy is the one that best supports your retirement income, financial security, and long-term goals.

Understanding Your Social Security Benefits

Before deciding when to claim Social Security, it's important to understand how your benefits are calculated and how your claiming age affects the amount you'll receive.

Social Security provides a foundation of retirement income that can last for the rest of your life. Unlike investment accounts, which fluctuate with financial markets, Social Security retirement benefits provide monthly payments based on your earnings history and the age at which you begin collecting.

For most retirees, the decision comes down to three important ages: 62, full retirement age, and 70.

Throughout this guide, we'll use examples of individuals who have fully retired at age 62 and are no longer earning employment income. Their retirement income will come from Social Security, personal savings, investment accounts, and other available retirement income sources.

This allows us to focus on how different claiming decisions affect the amount of money retirees need to withdraw from their investments.

The age you begin collecting Social Security affects more than your monthly payment. It can also influence how much of your retirement savings you need to spend.

The Three Important Social Security Ages

Age 62: The Earliest Opportunity to Claim

You can generally begin collecting Social Security retirement benefits at age 62.

Claiming at this age permanently reduces your monthly benefit compared with waiting until full retirement age.

However, for someone who has already retired, collecting benefits earlier provides an immediate source of retirement income. This can reduce the amount of money needed from IRAs, 401(k)s, and other investment accounts.

Age 67: Full Retirement Age

For individuals born in 1960 or later, full retirement age is 67.

At this age, you're eligible to receive 100% of your calculated primary insurance amount, commonly referred to as your full retirement benefit.

For individuals born before 1960, full retirement age ranges from 66 to 66 years and 10 months.

Someone who retires at 62 but waits until 67 to collect Social Security must generally rely on other income sources or retirement savings during those five years.

Age 70: Maximum Delayed Retirement Credits

Waiting until age 70 increases your monthly benefit through delayed retirement credits.

For individuals born in 1943 or later, these credits increase benefits by 8% annually after full retirement age, up to age 70.

Although this provides a larger monthly benefit, someone who retires at 62 and delays until 70 may need to fund eight years of retirement expenses without Social Security income.

There is no additional delayed retirement credit for waiting beyond age 70.

How Much Does Claiming Age Affect Your Benefit?

Consider a hypothetical individual who retires completely at age 62 with no additional employment income.

Assume their estimated Social Security benefit at full retirement age of 67 is $3,000 per month.

Their benefit would vary depending on when they begin collecting.

Hypothetical benefits shown in constant dollars, excluding future cost-of-living adjustments, taxes, and any changes in the earnings record. The individual is assumed to have stopped working at age 62.

At first glance, delaying until age 70 appears attractive.

This retiree would receive $1,620 more per month than someone claiming at age 62, representing an additional $19,440 annually.

However, this comparison overlooks an important consideration.

Someone who begins collecting at age 62 receives eight years of Social Security income before the person who delays until 70 receives their first payment.

In this example, that represents approximately $201,600 in Social Security benefits collected between ages 62 and 70.

For a retiree who is no longer working, these benefits can help cover living expenses that would otherwise need to be funded from investment accounts.

Waiting until age 70 increases your monthly Social Security benefit, but claiming at 62 may allow you to preserve more of your retirement savings during the first eight years of retirement.

Understanding the Social Security Break-Even Age

One common way to compare Social Security claiming strategies is by calculating the break-even age.

This represents the approximate age at which the cumulative benefits received by someone who delays claiming catch up with the benefits received by someone who claims earlier.

Using our hypothetical example:

• Claiming at 62 provides $2,100 per month.

• Claiming at 70 provides $3,720 per month.

• The early claimant receives approximately $201,600 before the delayed claimant begins collecting.

• After age 70, the delayed claimant receives $1,620 more per month.

Under these simplified assumptions, the delayed claimant catches up at approximately age 80 years and 4 months.

This illustrates why life expectancy plays an important role in the claiming decision.

Someone who lives to age 75 may receive more cumulative Social Security benefits by claiming earlier. Someone who lives to age 95 may receive substantially more by waiting.

However, there's an important limitation to this calculation.

The traditional break-even analysis compares Social Security payments but doesn't account for how claiming decisions affect your investment portfolio.

For someone who retires at age 62, this distinction can be significant.

If you delay Social Security until age 70, you may need to withdraw additional money from your investments for eight years.

If you claim at age 62, those benefits can help cover your expenses, allowing more of your investments to remain in your portfolio.

Depending on market performance, taxes, longevity, and withdrawal needs, those differences may influence your long-term financial outcome.

Likewise, the larger benefit available at age 70 may reduce investment withdrawals later in retirement and provide valuable protection against outliving your savings.

That's why we believe Social Security decisions should be evaluated alongside retirement investments rather than through a break-even calculation alone.

The question isn't simply how long you need to live to receive more Social Security benefits. It's how each claiming strategy affects your overall retirement income and investment balances.

Understanding How Social Security Benefits Are Calculated

Your Social Security retirement benefit is primarily based on your earnings history.

The Social Security Administration generally uses your highest 35 years of earnings, adjusted under its benefit calculation rules, to determine your benefit.

If you have fewer than 35 years of earnings, years with no earnings may be included in the calculation, potentially reducing your benefit.

For someone retiring at age 62, it's important to understand that their benefit estimate should reflect the fact that they will no longer be working.

Social Security estimates may assume continued employment and future earnings. If you stop working earlier than anticipated, your actual benefit may differ from those estimates.

Before comparing claiming strategies, retirees should review their Social Security earnings record and obtain benefit estimates that reflect their planned retirement date.

You can review your estimated benefits through your personal Social Security account at www.ssa.gov/myaccount.

The Relationship Between Social Security and Retirement Withdrawals

Let's consider a hypothetical retiree who stops working at age 62 and needs $80,000 annually to support their retirement lifestyle.

Assume they have sufficient retirement savings to fund their expenses and are eligible for $25,200 annually in Social Security benefits if they claim at age 62.

Their initial retirement income needs could look like this:

Hypothetical example assumes no employment income, other income sources, taxes, or cost-of-living adjustments. The delayed-claiming column illustrates the years before benefits begin.

By claiming at age 62, this individual initially reduces annual investment withdrawals by $25,200.

Over eight years, that represents $201,600 in withdrawals that may not need to come from the investment portfolio, before considering taxes, investment returns, inflation, and changes in spending.

This could be particularly valuable during periods of market volatility.

If financial markets experience significant declines during the early years of retirement, withdrawing less from investment accounts may reduce the need to sell investments while prices are depressed.

This is an important concept known as sequence-of-returns risk, which we'll explore in greater detail later in this guide.

Of course, after age 70, the retiree who delayed benefits would receive a larger Social Security payment and could potentially withdraw less from investments.

The appropriate strategy depends on how these differences play out over the entire retirement period.

For retirees who stop working at age 62, Social Security can provide an immediate income source that reduces reliance on investment withdrawals during the early years of retirement.

Social Security Is One Piece of Your Retirement Income Plan

Understanding how Social Security benefits are calculated is the first step toward making an informed claiming decision.

However, the larger question is how those benefits fit into your overall retirement strategy.

A retiree with $200,000 in savings may approach Social Security differently from someone with $2 million in investment accounts.

A married couple may have additional considerations involving spousal and survivor benefits. Someone with a pension, rental income, or substantial taxable investments may have different withdrawal and tax-planning opportunities.

For these reasons, there isn't one claiming age that works best for everyone.

We believe retirees should consider Social Security as part of their overall retirement income plan, evaluating not only monthly benefits but also portfolio withdrawals, investment risk, taxes, and long-term financial goals.

The best Social Security strategy isn't necessarily the one that produces the largest monthly check. It's the one that works most effectively with your retirement savings, income needs, and long-term financial goals.

The Case for Claiming Social Security Earlier

Conventional Social Security planning often emphasizes the financial benefits of waiting until age 70.

The argument is straightforward: delay collecting benefits, receive a larger monthly payment, and potentially collect more Social Security income over your lifetime.

But for individuals who retire at age 62 and have accumulated substantial investment assets, there's another strategy worth considering.

What if collecting Social Security earlier allows you to preserve more of your retirement savings, maintain greater investment flexibility, and potentially leave a larger financial legacy?

This approach considers Social Security as part of a comprehensive retirement income strategy rather than treating it as a separate benefit to maximize.

For retirees who are no longer working, collecting Social Security at age 62 can provide an immediate source of income, reducing the amount they need to withdraw from their investment accounts.

Those reduced withdrawals may have a meaningful impact over time, particularly when investment returns and compounding are considered.

Claiming Social Security earlier isn't necessarily about receiving the most benefits over your lifetime. It's about evaluating whether receiving income sooner can help you make better use of your retirement investments.

Preserving Your Retirement Portfolio

Consider our hypothetical retiree who stops working at age 62.

They have accumulated $1.5 million in retirement savings and need $80,000 annually to support their lifestyle.

Their estimated Social Security benefit is $2,100 per month, or $25,200 annually, if they begin collecting at age 62.

If they delay Social Security until age 70, they must fund their entire $80,000 annual income requirement from their retirement savings during those eight years.

However, if they begin collecting at 62, their investment withdrawals can be reduced.

Hypothetical example assumes full retirement at age 62, no employment income, and constant annual spending. Figures are before taxes and exclude Social Security cost-of-living adjustments.

By claiming Social Security at 62, this retiree initially withdraws $25,200 less annually from their investment portfolio.

Over eight years, that's $201,600 in cumulative withdrawals that may be avoided.

But the potential financial impact doesn't necessarily end there.

Money that remains invested can continue participating in market growth, potentially increasing the long-term value of preserving retirement assets.

What Could $201,600 in Preserved Retirement Savings Become?

This is where the benefits of claiming Social Security earlier become particularly interesting.

Let's assume our hypothetical retiree collects $25,200 annually in Social Security benefits from ages 62 through 69.

Instead of withdrawing that amount from their investments, they leave the equivalent funds invested.

Now assume their investments earn a hypothetical average annual return of 7%.

Because the $25,200 is preserved gradually over eight years rather than all at once, each year's retained amount has a different period to compound.

Under these assumptions, the $201,600 in withdrawals avoided during the first eight years of retirement could represent approximately $582,000 in investment value by age 82.

That's nearly three times the original amount of withdrawals avoided.

This illustration demonstrates the potential power of keeping retirement assets invested rather than withdrawing them to cover expenses.

However, there's an important distinction: this is the future value of the early withdrawals avoided, not the net advantage of claiming Social Security at 62 versus 70.

Beginning at age 70, the retiree who delayed Social Security would receive a larger monthly benefit and could potentially withdraw less from their portfolio. A complete comparison must account for those later savings as well.

Actual outcomes also depend on market returns, taxes, spending needs, and longevity.

Nevertheless, the illustration highlights an important consideration that traditional Social Security break-even calculations often overlook.

When evaluating Social Security, the potential growth of investments that remain in your portfolio deserves consideration alongside the monthly benefit you receive.

Reducing Sequence-of-Returns Risk

One of the greatest challenges retirees face is something known as sequence-of-returns risk.

This refers to the impact that the timing of investment gains and losses can have on a portfolio when withdrawals are being made.

During the accumulation years, investors can generally continue contributing to their portfolios through market downturns.

In retirement, however, the situation changes.

Instead of adding money to investments, retirees are often withdrawing money to cover living expenses.

If financial markets decline significantly during the first several years of retirement, those withdrawals may require selling investments at depressed prices.

This can permanently reduce the number of shares remaining in the portfolio and limit the portfolio's ability to recover when markets improve.

Consider two retirees who both stop working at age 62.

Both need $80,000 annually to support their lifestyle, and both experience a significant stock market decline shortly after retirement.

The first retiree begins collecting Social Security immediately and needs $54,800 annually from investments.

The second delays Social Security and needs the full $80,000 annually from investments.

During a market downturn, the second retiree may need to sell more investments to generate the same household income.

Those additional withdrawals can place greater pressure on the portfolio during an already challenging period.

Of course, claiming earlier does not eliminate sequence-of-returns risk, and the larger benefit available from delaying can help reduce portfolio withdrawals later in retirement.

However, for retirees concerned about preserving investment assets during the early years of retirement, Social Security can serve as an additional source of income that reduces immediate reliance on market-dependent investments.

Claiming Social Security earlier may help reduce the amount of investments you need to sell during the early years of retirement, when sequence-of-returns risk can be especially important.

Maintaining Greater Financial Flexibility

Retirement planning isn't only about maximizing income. It's also about maintaining access to financial resources when unexpected needs arise.

During retirement, individuals and families may encounter expenses that weren't anticipated when they first stopped working.

These might include major home repairs, medical expenses, helping children or grandchildren, purchasing a vacation property, or making significant charitable gifts.

Preserving investment assets during the early years of retirement may provide additional flexibility to address these opportunities and expenses.

For example, an investor who collects Social Security at 62 may have more assets remaining in their investment accounts at age 70 than they otherwise would have if they had delayed benefits.

Those assets could provide liquidity for unexpected expenses, opportunities to rebalance investments, or resources for family and charitable objectives.

However, financial flexibility has two sides.

A larger Social Security benefit at age 70 can also provide valuable flexibility by reducing the amount of investment income needed later in retirement.

The appropriate strategy depends on whether the retiree places greater value on preserving liquid assets earlier or securing a larger lifetime income stream later.

A successful retirement income strategy should consider both the income you receive and the financial resources you retain.

The Potential Impact on Your Financial Legacy

For many retirees, their financial goals extend beyond providing income during their own lifetime.

They may also want to leave assets to a surviving spouse, children, grandchildren, charitable organizations, or other beneficiaries.

This creates another important consideration when deciding when to claim Social Security.

Social Security retirement benefits generally don't create an inheritable account balance. Although eligible spouses and certain dependents may qualify for survivor benefits, unused future retirement benefits cannot simply be transferred to heirs.

Investment accounts, on the other hand, may represent assets that can be transferred to beneficiaries, subject to applicable taxes and estate planning considerations.

If claiming Social Security earlier helps preserve retirement investments, those assets may remain available for future generations.

For example, a retiree who collects Social Security at 62 may preserve more investment assets during the first eight years of retirement. If those assets remain invested and grow over time, they may contribute to a larger estate.

However, this isn't guaranteed.

Someone who delays Social Security may receive substantially greater lifetime benefits if they live well into their 80s or 90s. Those larger payments may allow them to preserve more investments later in retirement.

For married couples, delaying the higher earner's benefit may also increase the Social Security survivor benefit available to the surviving spouse, which can be an important form of financial protection.

These considerations make it especially important to evaluate Social Security decisions in the context of family circumstances and estate planning goals.

For retirees who prioritize leaving a financial legacy, the impact of Social Security claiming decisions on investment account balances deserves careful consideration.

Why Claiming Earlier May Make Sense for Some Retirees

There are several circumstances in which claiming Social Security earlier may be worth considering.

Retiring Completely at Age 62

For individuals who have stopped working, Social Security can provide an immediate source of retirement income without concerns about employment earnings reducing benefits under the retirement earnings test.

Having Substantial Retirement Savings

Retirees with significant investment portfolios may want to evaluate whether collecting Social Security earlier helps preserve assets for future growth, liquidity, or legacy planning.

Reducing Early Retirement Withdrawals

Receiving Social Security income sooner can reduce the amount needed from IRAs, 401(k)s, and taxable investment accounts during the first several years of retirement.

Managing Investment Market Risk

Lower portfolio withdrawals may reduce the need to sell investments during market downturns, particularly during the early years of retirement.

Prioritizing Financial Flexibility and Legacy Goals

Some retirees place significant value on maintaining liquid investment assets and preserving wealth for their families.

Considering Personal Health and Longevity

Individuals with shorter life expectancies may receive more cumulative Social Security benefits by claiming earlier. However, married couples should also consider the potential financial needs of a surviving spouse.

None of these factors automatically makes claiming at 62 the best choice. They are reasons to evaluate early claiming as part of a comprehensive retirement income plan.

Looking at the Entire Retirement Picture

It's easy to compare a $2,100 monthly Social Security benefit at age 62 with a $3,720 benefit at age 70 and conclude that waiting is the better strategy.

But that comparison only tells part of the story.

For someone who retires at age 62, waiting eight years means relying more heavily on other income sources or personal investments during that period.

Claiming earlier may reduce those withdrawals, preserve more investment assets initially, and create opportunities for additional investment growth.

On the other hand, delaying Social Security provides a larger inflation-adjusted lifetime benefit, which may become increasingly valuable during a long retirement.

The strongest analysis should compare how different claiming ages affect total lifetime income, portfolio withdrawals, investment balances, taxes, surviving spouses, and potential legacy assets.

This is why we believe Social Security should be evaluated as part of a comprehensive retirement income strategy rather than as a standalone benefit.

The goal isn't simply to collect the largest Social Security check. It's to coordinate Social Security and your investments in a way that best supports your retirement income, financial flexibility, and long-term legacy.

The Case for Waiting Until Age 70

Throughout this guide, we've explored how claiming Social Security earlier may help retirees preserve investment assets, reduce portfolio withdrawals, and maintain greater financial flexibility.

However, delaying Social Security can also provide meaningful advantages, particularly for individuals who expect to live well into their 80s or 90s.

The decision becomes especially interesting when someone plans to continue working beyond traditional retirement age.

For these individuals, Social Security isn't necessarily needed to cover immediate living expenses. Instead, they may have an opportunity to choose between receiving benefits earlier and investing the proceeds or delaying benefits to secure a larger monthly payment later.

The decision to delay Social Security should consider more than the size of your future benefit. It should also consider your retirement date, investment opportunities, longevity, and overall financial goals.

Why Waiting Until Age 70 Can Make Sense

For individuals born in 1960 or later, full retirement age is 67.

Once you reach full retirement age, your Social Security benefit generally increases by 8% for each year you delay claiming, up to age 70.

This means someone eligible for $3,000 per month at age 67 could receive approximately $3,720 per month by waiting until age 70.

That's a 24% increase in monthly benefits, before future cost-of-living adjustments.

The primary advantages of delaying include:

• Higher Lifetime Income: A larger monthly benefit can provide greater financial security throughout a long retirement.

• Longevity Protection: Social Security continues for life, making a higher benefit particularly valuable for individuals who live into their 90s or beyond.

• Inflation Protection: Social Security benefits generally receive annual cost-of-living adjustments, helping protect purchasing power.

• Survivor Benefits: For married couples, delaying the higher earner's retirement benefit may increase the benefit available to a surviving spouse.

• Reduced Portfolio Withdrawals Later: Larger Social Security payments may reduce the amount needed from investments during the later years of retirement.

These advantages shouldn't be overlooked.

For someone with a family history of longevity, limited investment savings, or a spouse who may depend heavily on survivor benefits, delaying Social Security can be an attractive strategy.

Waiting until age 70 may be especially valuable when the priority is maximizing guaranteed lifetime income and protecting against the financial risks of a long retirement.

What If You Plan to Work Until Age 70?

Many individuals are choosing to remain employed beyond their traditional retirement years.

Some enjoy their careers, while others want to continue building retirement savings, maintain employer benefits, or simply aren't ready to retire.

For these individuals, the Social Security decision can look quite different from someone who stops working at age 62.

If you're continuing to work and don't need Social Security income to cover living expenses, you have two primary options once you reach full retirement age:

1. Begin collecting Social Security while continuing to work.

2. Delay collecting until age 70 to receive a larger monthly benefit.

An important distinction is that once you reach full retirement age, there is no Social Security retirement earnings limit.

You can continue earning employment income without having your Social Security retirement benefits reduced because of the earnings test.

That means someone who continues working until age 70 may be able to begin collecting benefits at age 67, even if they earn a substantial salary.

However, those benefits may be subject to federal income taxes, and higher income may also affect Medicare premiums.

This creates an interesting planning opportunity.

If you're working beyond full retirement age, you may be able to collect Social Security benefits while continuing to earn a salary, allowing you to save or invest those benefits rather than relying on them for living expenses.

Claiming at 67 vs. Waiting Until 70

Let's return to our hypothetical individual with a $3,000 monthly Social Security benefit at full retirement age.

Assume this person continues working until age 70 and doesn't need Social Security income to support their lifestyle.

They have two options.

Hypothetical benefits expressed in constant dollars, excluding cost-of-living adjustments, taxes, and possible increases from additional employment earnings.

By claiming at age 67, this individual receives $108,000 in Social Security benefits before reaching age 70.

If they don't need the income, those benefits could be saved, invested, or used for other financial objectives.

Alternatively, waiting until age 70 provides an additional $720 per month, or $8,640 annually, for the remainder of their life.

Under a simplified cumulative-benefits comparison, the individual who delays until age 70 catches up at approximately age 82½.

But once again, this calculation doesn't consider the potential investment returns on benefits received earlier.

For individuals who continue working beyond full retirement age, collecting Social Security at 67 and investing the benefits may be worth comparing with the larger lifetime income available by waiting until 70.

The Potential Value of Investing Social Security Benefits

Suppose our hypothetical individual claims Social Security at age 67 and invests the $36,000 in annual benefits received during the next three years.

Assume those investments earn a hypothetical 7% annual return.

Rather than spending the benefits, the individual allows them to remain invested for future retirement needs.

At age 70, the three annual contributions would have a hypothetical value of approximately $115,700, assuming contributions at each year-end.

If the investment balance remained untouched and continued earning 7% annually, it could grow to approximately $227,600 by age 80.

This demonstrates how collecting benefits earlier may create an opportunity to accumulate additional investment assets.

However, the person who delays until age 70 receives a larger Social Security benefit for the remainder of their life. Those additional payments may reduce withdrawals from other investments or provide greater financial security during later retirement years.

The comparison also depends on investment performance, taxes, longevity, and the value of guaranteed income.

For someone who continues working, claiming Social Security at full retirement age may provide an opportunity to build additional investment assets before retirement begins.

Why Longevity Changes the Decision

Life expectancy is one of the most important factors in determining when to claim Social Security.

Someone who claims earlier receives more years of benefits, while someone who delays receives larger payments later.

For individuals who live into their late 80s or 90s, the additional income from delaying Social Security can become increasingly valuable.

This is particularly important because investment portfolios aren't guaranteed to produce consistent returns.

A retiree who experiences weak investment performance, unexpected expenses, or a longer-than-anticipated retirement may benefit from having a larger guaranteed monthly benefit.

Social Security also provides a form of longevity protection that investment accounts alone cannot replicate.

For married couples, this consideration may be even more important.

When one spouse passes away, the surviving spouse may qualify for a survivor benefit based on the deceased spouse's benefit. Delaying the higher earner's Social Security benefit can therefore provide additional protection for the surviving spouse.

The longer your retirement lasts, the more valuable a larger lifetime Social Security benefit may become.

Don't Overlook Taxes and Medicare Premiums

For individuals who continue working beyond age 65, collecting Social Security benefits may create additional tax considerations.

Depending on your combined income, up to 85% of your Social Security benefits may be included in federal taxable income.

Additionally, higher income can affect Medicare premiums through the Income-Related Monthly Adjustment Amount, commonly known as IRMAA.

IRMAA is an additional Medicare premium amount that applies when income exceeds certain thresholds.

For example, someone earning a substantial salary while collecting Social Security may experience additional taxable income, potentially influencing their Medicare premiums.

This doesn't necessarily mean they should delay Social Security. However, it does mean the decision should be evaluated on an after-tax basis.

A financial advisor can help coordinate Social Security claiming decisions with retirement account withdrawals, Roth conversions, investment income, and other financial planning considerations.

The best Social Security strategy should consider what you keep after taxes and potential Medicare surcharges—not simply the gross benefit you receive.

Retirement Age and Social Security Claiming Age Are Two Different Decisions

One of the most important concepts in Social Security planning is recognizing that the age you retire and the age you begin collecting benefits don't have to be the same.

Someone who retires at 62 may benefit from claiming immediately to reduce investment withdrawals.

Someone who retires at 67 may choose to begin collecting benefits at full retirement age.

Someone who continues working until 70 may find it advantageous to collect benefits at 67 and invest them.

And someone who retires earlier but has substantial financial resources may still benefit from delaying Social Security until age 70, particularly when longevity protection or survivor benefits are priorities.

Each strategy has advantages and tradeoffs.

The appropriate decision depends on the relationship between Social Security income, investment assets, taxes, retirement spending, family circumstances, and long-term goals.

The best age to retire and the best age to claim Social Security aren't necessarily the same. Both decisions should be coordinated as part of your overall retirement income plan.

Making the Decision That Fits Your Retirement

Delaying Social Security until age 70 can be a valuable strategy, particularly for individuals seeking larger guaranteed lifetime income.

However, waiting isn't automatically the best decision for everyone.

For retirees who stop working at age 62, collecting earlier may help preserve investment assets and reduce portfolio withdrawals.

For individuals who continue working beyond full retirement age, collecting at 67 may create opportunities to save or invest benefits that aren't needed for immediate expenses.

And for individuals who prioritize longevity protection or survivor income, delaying may provide important financial advantages.

Rather than following a universal recommendation to claim early or wait until 70, retirees should evaluate how each strategy affects their complete financial picture.

Maximizing Social Security isn't about choosing the latest possible claiming age. It's about choosing the strategy that best supports your retirement income, investment portfolio, financial security, and long-term goals.

Building a Social Security Strategy Around Your Retirement

Deciding when to collect Social Security is one of the most important retirement planning decisions you'll make.

Unfortunately, it's also a decision that is often oversimplified.

Many retirees are encouraged to delay Social Security until age 70 to maximize their monthly benefit. While that can be an effective strategy, it doesn't necessarily produce the best financial outcome for everyone.

For individuals who have accumulated substantial retirement savings, claiming Social Security earlier may help reduce investment withdrawals, preserve more retirement assets, and provide greater financial flexibility.

For others, delaying benefits may provide valuable protection against longevity risk and increase the income available to a surviving spouse.

The important consideration is how Social Security fits into your overall financial picture.

The goal isn't simply to maximize your Social Security check. It's to maximize the effectiveness of your entire retirement income strategy.

Your Social Security Decision Should Consider More Than Your Age

Before deciding when to claim benefits, it's important to evaluate how that decision affects other areas of your financial plan.

These considerations may include:

• Retirement Income: How much income will you need, and how much must come from your investment accounts?

• Investment Portfolio: Could claiming earlier reduce withdrawals and allow more of your retirement savings to remain invested?

• Taxes: How will Social Security benefits interact with IRA withdrawals, Roth conversions, capital gains, and other sources of taxable income?

• Medicare Premiums: Could your claiming decision affect income-related Medicare surcharges, commonly known as IRMAA?

• Spousal and Survivor Benefits: How could your decision affect the financial security of your spouse?

• Longevity and Legacy Planning: Which strategy best balances lifetime income, financial flexibility, and wealth you may wish to leave behind?

These factors can make a meaningful difference in determining which claiming strategy is appropriate.

For someone who retires completely at age 62, collecting Social Security immediately may help preserve investment assets during the early years of retirement.

For someone who continues working beyond full retirement age, collecting benefits at age 67 and investing the proceeds may be worth considering.

And for someone seeking greater guaranteed lifetime income, delaying until age 70 may be advantageous.

There isn't one Social Security claiming age that's best for everyone. The right decision depends on your retirement goals, financial resources, and personal circumstances.

How a Financial Advisor Can Help

Social Security is just one component of a successful retirement income plan.

At BPG Wealth Management, we believe your Social Security claiming decision should be coordinated with your investments, retirement income needs, tax considerations, and long-term financial goals.

As a third-generation financial planner and Partner at BPG Wealth Management, I help individuals and families evaluate retirement income strategies designed around their unique circumstances.

My approach emphasizes comprehensive financial planning, personalized investment management, and thoughtful coordination of the financial decisions that affect your retirement.

Rather than automatically recommending that clients delay Social Security until age 70, I believe it's important to evaluate the potential advantages and disadvantages of claiming earlier.

That means looking beyond the monthly benefit and considering how different claiming strategies may affect your investment portfolio, retirement income, taxes, and financial legacy.

Your Social Security decision shouldn't be made in isolation. It should be part of a coordinated retirement income strategy designed around your financial goals.

Request Your Personalized Social Security Analysis

Are you approaching retirement and wondering when you should begin collecting Social Security?

Or have you already retired and are considering whether to claim benefits now or wait?

We invite you to schedule a complimentary introductory consultation to discuss your retirement goals and explore whether a personalized Social Security analysis may be appropriate.

Depending on your circumstances, our analysis can help you evaluate:

• Social Security Claiming Strategies: Compare potential benefits at ages 62, full retirement age, and 70.

• Retirement Portfolio Impact: Evaluate how different claiming ages may affect investment withdrawals and long-term account balances.

• Retirement Income Planning: Coordinate Social Security with your IRAs, 401(k)s, taxable investments, and other income sources.

• Tax Planning Opportunities: Consider how Social Security decisions interact with retirement taxes, Roth conversions, and Medicare IRMAA.

• Spousal and Survivor Benefits: Evaluate claiming strategies in the context of your family's financial security.

• Long-Term Financial Goals: Balance retirement income, financial flexibility, investment risk, and legacy planning.

The objective is to help you understand your options and make an informed decision based on your own financial circumstances.

Let's Make the Most of Your Retirement

You've spent decades working, saving, and investing for retirement. Your Social Security decision should support everything you've worked to accomplish.

Whether you're planning to retire at 62, continue working until 70, or somewhere in between, we welcome the opportunity to help you develop a retirement income strategy that makes sense for you.

Schedule your complimentary introductory consultation today.