Filing for Social Security? Do Your Homework

As we age, we realize it’s increasingly important to get familiar with our financial future long before we actually retire. This includes cultivating our future income streams like pensions, annuities, interest, IRAs, and let’s not forget about Social Security. Further down the line, when you’re on the cusp of retirement, it is even more important to thoroughly research, comprehend, and maximize your fixed retirement income. With inflation, the ballooning of healthcare costs, and the fact that we are all living longer, we’ll need to be smarter and savvier to get the most out of our retirement benefits so as not to outlive them.

Looking ahead
At age 40, I have not thought much about Social Security. My focus has been primarily on annuities, IRAs and investment options. Truthfully, at this point in my life, my only real thoughts about Social Security were, “what shape will it be in or will it even exist when I retire?” However, earlier this week, I hosted a Messiah Lifeways Coaching workshop entitled Social Security: Your Questions Answered. I was happy to have Jamie Mladenoff, a financial advisor from Edward Jones®, share his insight and advice with attendees at or near retirement. Jamie relayed the statement, “Social Security will likely be the foundation of your retirement income, and before you retire it’s important to understand your options and the effect your decisions have on your retirement.” He also cited [Income of the Aged Chart book 2008] which states, “on average about 37% of our retirement income is through Social Security benefits.” Therefore, it serves as a major chunk of retirement income and supports the necessity to maximize that monthly payout.

Looking at the numbers
The workshop was very informative. First, there are a number of factors that can affect your benefit. Many are out of our control after the fact, such as, when you were born , the amount of time you worked and your “peak 35 years of earnings” adjusted for inflation; all of which help calculate your benefit. However, one factor you can control is when you choose to start receiving benefits. Most people know that if you take your benefits early at age 62 you will only receive ≈75% of your full benefit indefinitely. Benefits do incrementally increase each year between 62 and 65, however they still never reach the full benefit you’re entitled to when you file early. So for example, if you wait to draw benefits when you’re 64, it would be ≈88% of the benefit versus 100% if you wait till 66 years old, which is normally considered full retirement age (FRA). That 12% difference over 10 or 20 years could be a huge swing in your financial comfort zone. On the flip side, if you delay receiving benefits beyond age 66, the monthly payout increases by ≈8% every year until age 70. Furthermore, there is no reason to delay filing after age 70, because the max benefit of an additional ≈32% caps at that point. It’s also important to note that filing early or late also affects spousal benefits.

Many people begin taking benefits before age 66. However, as the example shows above, there’s no denying that the difference of just a few years in filing can have a substantial impact on your benefits as well as the surviving spouse. My initial reaction to this would be to delay as long as I can. But that is easy for me to say at this time in my life. Everyone’s circumstances and outlook is different.

Jamie added that you need to consider the following when deciding on when to take your benefit: first, guesstimating your life expectancy, deciding to maintain gainful employment at normal retirement age, determining how much income you need on a monthly basis, and lastly, how your spouse will be impacted by the survivor benefit.

In conclusion, I feel most people that need to, do have a “basic grasp” on Social Security, but there are a lot more details and intricacies that require a deeper understanding. As the Social Security website states regarding retirement, “there is no one “best age”, and ultimately, it is your choice.” So take the time to learn more about it, talk it over with your spouse, or seek the guidance of a financial advisor, or visit for additional information and advice.

Matthew J. Gallardo

Matthew J. Gallardo

Matt is the Director of Community Engagement and Coaching at Messiah Lifeways. He brings nearly 20 years of experience in counseling, advocating, and guiding older adults and caregivers through many of life’s tough decisions. His diverse background of working in hospital and rehabilitation settings, community services, and senior housing gives him the breadth and depth of knowledge to provide unique solutions, opportunities, and help individuals proactively plan for the future. He serves as the Lifeways Coach and as a writer, blogger, podcaster, and speaker for Messiah Lifeways, located in Mechanicsburg, PA.

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