One of the most critically important components of millions of Americans’ retirement plans is an 85-year-old government entitlement program called Social Security. In 1998, 59 percent of Fortune 500 companies offered a defined benefit, or pension plan, but by 2015, that number was down to 20 percent and dropping. For many retirees, Social Security is the only defined benefit plan they have, making up over half of their retirement income.

How much Social Security are you eligible for?

To be eligible for Social Security, you need to earn 40 credits over the course of your working career. In 2024, for every $1,730 you earn, you receive one credit, up to a maximum of four credits per year. The amount you’re eligible to be paid is based on the average income (adjusted for inflation) during the 35 highest-earning years of your career. Social Security benefits fall under four categories:

• Retirement: Eligible workers can begin receiving benefits at age 62 or older.
• Survivor benefits: Available for a spouse or minor child.
• Disability benefits: For those under retirement age but eligible under Social Security guidelines.
• Family benefits: For the spouse (both former and current) and minor children of an eligible recipient.

Big Decision: When should you begin taking Social Security?

One of the biggest retirement decisions is when to begin taking Social Security benefits. While you can start as early as age 62, doing so results in a reduced benefit compared to what you'd receive at your Full Retirement Age (FRA). For those born after 1960, FRA is 67. For people born earlier, FRA ranges between 66 and 67.

If you delay taking Social Security beyond your FRA, your benefit increases by about 8 percent per year, up until age 70. However, if you claim at age 62 (five years before FRA for most), you could face a 30% permanent reduction in your monthly benefits. These rules also apply to spousal benefits, which generally amount to half of the primary earner's benefit—but only if the spouse’s Social Security benefit is less than half of the primary earner's.

How to get your personal account (and useful planning calculators)

To get personalized information on your Social Security benefits, sign up for your account at www.ssa.gov. There, you’ll find the best estimates for your Primary Insurance Amount (PIA) at different ages, along with calculators to help you plan how much you and your spouse can expect to receive.

If you are over 50, any future reductions are unlikely to impact you.

It’s tempting for many to claim Social Security early, especially since six out of ten non-retirees worry that Social Security will run out by the time they're eligible. While the Social Security trust fund is approaching a tipping point, it's expected that by 2035, income will still cover around 80% of benefits. There are numerous ways for the government to prevent a reduction in benefits, and those over 50 today are unlikely to see significant impacts. So, don’t let fear of "missing out" drive your decision to claim benefits early.

How do I assess what age is best for me to begin collecting social security?

A general rule of thumb is that if you live 12 ½ years from the time you take Social Security, you will “break even,” and the longer you live after that, the better it will be that you waited. Someone with poor health or a family history of a lack of longevity may be better served to take it early, while those in good health and grandparents in their 90’s would be good candidates for maxing their Social Security out by waiting till they are 70! However, not everyone can wait until they are 70 for financial reasons (and maybe cannot afford to burn through their retirement savings to get to FRA or later). Every person or couple is different, and there is not a one-size fits all approach to this question.

You only get one chance to file for Social Security
at the right time to get this important, tax-advantaged,
guaranteed income for life.

You only get one chance to file for Social Security at the right time to get this important, tax-advantaged, guaranteed income for life. To help guide your decision we are here to help! For a complimentary consultation, please visit us at www.f5fp.com.

This post was written by Bob Anderberg, F5 Financial’s National Social Security Advisor Certificate Holder.

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