When it comes to retirement, Social Security is more than just a government benefit, it’s a cornerstone of your income strategy. Yet, many individuals approaching retirement underestimate how important the timing of your Social Security claiming decision can be. It’s not just about when you need the money, it’s about how this decision aligns with your broader retirement income planning, tax strategy, and even healthcare costs like Medicare IRMAA surcharges.

If you’re age 50 or older, understanding your Social Security options can help you maximize lifetime benefits, minimize taxes, and reduce the risk of running out of money later in retirement.

The Basics of Social Security Claiming

You can claim Social Security as early as age 62, but waiting until your Full Retirement Age (FRA) (between 66 and 67, depending on your birth year) means receiving 100% of your benefit. Delay until age 70, and your benefit can increase by up to 8% per year past FRA due to delayed retirement credits.

This isn’t just about higher monthly checks—it’s about making an informed decision based on your health, longevity expectations, marital status, and income needs.

Why Social Security Claiming Isn’t One-Size-Fits-All

Every person’s situation is unique. Here are some of the key variables that affect the optimal claiming strategy:

  • Life expectancy: If you expect to live well into your 80s or beyond, delaying benefits can pay off.
  • Spousal strategies: Married couples can coordinate benefits for better outcomes, especially using spousal or survivor benefit strategies.
  • Current income and cash flow needs: Claiming early might reduce withdrawals from investment accounts, but it could also permanently reduce your lifetime benefit.
  • Health status: If you have health concerns, earlier claiming may make sense.
  • Work status: If you’re working while collecting before FRA, your benefits may be temporarily reduced.

The Tax Impact of Social Security Benefits

Many retirees are surprised to learn that up to 85% of your Social Security benefits may be taxable depending on your other income sources. Claiming early while still working can also bump you into a higher tax bracket, diminishing the value of your benefit.

This is why it’s critical to integrate your Social Security strategy into a broader tax-efficient retirement income plan—one that includes Roth conversions, IRA withdrawals, and taxable investment distributions.

Medicare IRMAA and Claiming Decisions

Delaying Social Security may increase your taxable income in early retirement if you’re drawing down other assets to bridge the gap. This can affect Medicare IRMAA (Income-Related Monthly Adjustment Amounts)—higher premiums for Medicare Part B and D that apply if your income exceeds certain thresholds.

Coordinating your claiming decision with Medicare planning helps avoid unintended premium hikes.

Building a Social Security Bridge Strategy

If delaying your benefit is the optimal path, you’ll need to create a “Social Security bridge”—a temporary income source to cover expenses until benefits begin. This can include:

  • Withdrawals from savings or IRAs
  • Pension income or part-time work
  • Tax-efficient asset liquidation

A well-designed bridge strategy can increase lifetime income, reduce taxes, and create more long-term flexibility.

 

Why Claiming Should Be Part of a Comprehensive Plan

Claiming Social Security in a vacuum is risky. Instead, this decision should be evaluated in the context of your entire financial plan, including:

  • Retirement income planning
  • Investment withdrawal strategies
  • Tax planning
  • Healthcare and long-term care projections
  • Legacy goals

An experienced financial advisor can model various claiming scenarios to help you understand the long-term impacts on your financial security.

Final Thoughts: The Value of Planning Early

If you’re in your 50s or early 60s, now is the time to evaluate your Social Security strategy. The right decision can mean tens or even hundreds of thousands of dollars in additional lifetime income. Just as important, it can provide peace of mind knowing you’ve made a data-driven choice that supports your overall retirement goals.

Ready to Talk?

Want to understand how Social Security fits into your retirement picture? Schedule a complimentary consultation with our planning team today to explore personalized strategies built around your goals, income needs, and long-term vision.