Posted on May 25, 2018 in

Making Sense of Social Security

By Peter C. Golotko, CPA/PFS, MBA, and Matthew Treskovich, CPA/PFS, MBA, CFP®, CMA

The Social Security system was created in 1935 to help provide economic security in old age. Since then, Social Security has expanded to provide other kinds of benefits. It now provides retirement, disability, and survivor benefits. For many people, Social Security will be an important source of retirement income.

Your Social Security retirement benefit will depend on several factors. The calculation uses your top 35 years of earnings. If your benefit calculation includes a few years with little or no earnings, it might be to your advantage to work as long as possible. Replacing years of low (or no) earnings with years of higher earnings can give you a larger retirement benefit.

Sometimes it pays to procrastinate

You can choose to receive retirement benefits as early as age 62. If you take benefits before your full retirement age, your monthly benefit is permanently reduced. One important feature of Social Security is that you cannot outlive the retirement benefit. If you live a long time, taking early retirement can greatly reduce the total benefits you receive in retirement. If you are in good health and have other sources of income, it usually makes sense to wait until full retirement age before collecting benefits.

Full retirement age for Social Security was originally set at age 65. In 1983, the law was changed, and the full retirement age was increased for everyone born after 1937. Currently, the latest full retirement age is 67, for those born in 1960 and later.

When you reach full retirement age, Social Security gives you the option to delay your benefits. Your benefit increases by 8% for every year you delay retirement, up to age 70. If you are financially able to delay collecting benefits, and you are in good health, delaying your retirement benefit could be a great idea.

Get help if you need it

Social security is complicated! The first step to understanding your retirement benefits is to get a copy of your Social Security Statement. You can retrieve your statement online at If you have questions about your benefit statement, start by calling the Social Security Administration or visiting your local SSA office. SSA employees can only help with benefit questions. They won’t be able to give you tax advice or help you understand how Social Security fits into your overall retirement plan. For this kind of help, you should seek the advice of an experienced and credentialed financial planner. The decisions you make when you start collecting social security can impact how much money you have for the rest of your retirement. Choose wisely, and don’t hesitate to seek expert advice!