According to FINRA, most retiree’s income comes from a combination of defined benefit plans (pensions — rare in today’s job market), defined contribution plans (IRAs, HSAs, and 401ks), home equity, and Social Security payments.
Most financial advisors recommend setting a goal of saving between 8–12 times of pre-retirement income to live comfortably in retirement.
For example, someone making $70,000 a year should aim to save $560,000–$840,000 during their working years in retirement accounts. For those who rent and do not own their home by the time they retire, that figure will be even higher.
Delayed Retirement Credit
The earliest age that meets eligibility criteria to claim Social Security is 62. However, doing so reduces monthly benefits by 30% compared to waiting until full retirement age (FRA). Full Retirement Age is between 66 and 67, depending on the retiree’s date of birth.
By delaying the claim, benefits increase by 8% annually, until age 70, known as “Delayed Retirement Credit” (DRC).
This increase begins the year after reaching FRA and stops at age 70, offering a robust safety net. Social Security is backed by the U.S. government and includes inflation protection, which can drastically change the financial picture.
The table below illustrates the benefits of delaying Social Security claims and outlines the full retirement age.
| Birth Year | Age 62 | Age 63 | Age 64 | Age 65 | Age 66 | Age 67 | Age 68 | Age 69 |
| 1943-1954 | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% |
| 1955 | 74.2% | 79.2% | 85.6% | 92.2% | 98.9% | 106.7% | 114.7% | 122.7% |
| 1956 | 73.3% | 78.3% | 84.4% | 91.1% | 97.8% | 105.3% | 113.3% | 121.3% |
| 1957 | 72.5% | 77.5% | 83.3% | 90% | 96.7% | 104% | 112% | 120% |
| 1958 | 71.7% | 76.7% | 82.2% | 88.9% | 95.6% | 102.7% | 110.7% | 118.7% |
| 1959 | 70.8% | 75.8% | 81.1% | 87.8% | 94.4% | 101.3% | 109.3% | 117.3% |
| 1960 or later | 70% | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% |
Getting The Most Out Of Your Social Security Payments
Phil Moeller, co-author of the book Get What’s Yours cautions retirees about common pitfalls when filing for Social Security.
In an interview with Morningstar, Moeller emphasizes that many retirees claim early with the goal of “breaking-even.” From there, they will reinvest benefit payments for greater market returns.
However, Moeller advises viewing Social Security as longevity insurance. By waiting until age 70 to claim benefits, retirees receive a 76% increase in monthly benefits for life.
Related: Million of Social Security Recipients Affected by New Changes
Coordination of Spousal Benefits
Retirees often overlook how their Social Security claim can impact other benefits.
For instance, claiming a spousal benefit before Full Retirement Age (between 66-67) means the retiree, in effect, claims their own Social Security benefit. This process is known as “deeming.”
Whatever the benefit a worker is eligible for is known as Primary Insurance Amount (PIA). Primary Insurance Amount is determined by how much the claimant has paid into Social Security during their working years.
- The worker who paid into Social Security is eligible for up to 100% of the total PIA. If they work until age 70, they may get between 116–124% of their total PIA through the DCA credit.
- Their spouse is eligible for up to 50% of their partner’s PIA.
*Spousal benefit caps out at Full Retirement Age (66–67), or 100% of the spouse’s PIA. Therefore, even if the worker continues to work until age 70 and earn the DCA credit beyond 100%, the spousal benefit still caps out at 50% of whatever the spouses’ PIA is. - If the higher earner retires before full retirement age, thereby not collecting 100% of their PIA, their spouse can still claim up to 50% of the spouse’s full PIA amount if they work to their full retirement age.
- If the spouse claiming the spousal benefit retires before their own full retirement age, they will receive less than 50% of their spouse’s PIA.
Breakdown of Spousal Benefits
The following table outlines the percent the spouse can claim on their partner’s spousal benefit, depending on the age they retire.
*Remember, the maximum the spousal benefit is 50%.
| Spousal Benefit Claimee Age of Retirement | % of Spousal Benefit they can claim (50% MAX) |
| 62 | 32.5% |
| 63 | 35% |
| 64 | 37.5% |
| 65 | 41.66% |
| 66 | 45.83% |
| 67 | 50% |
- The worker must first file for their benefits before the spouse becomes eligible to collect spousal benefit.
- The spouse that earns the most will provide the spousal benefit for their partner; the inverse is not true. If the higher earner retires before full retirement age, accepting the lower payments, the spouse can still collect the full 50% of the spouse’s PIA if they work until Full Retirement Age.
- If both spouses work and pay into their own PIAs, the spousal benefit will only apply to the difference between their benefit payments.
For example, if the higher-earning partner’s monthly SSI benefit is $3,000 per month, and the lower-earner’s is $2,000 per month, the lower earner can claim a $500 per month spousal benefit, which is 50% of the $1000 difference between their PIAs. This assume that the lower earner works until full retirement age, and can claim the full 50% of the spousal benefit.
This results in receiving the greater of their own benefit or the spousal benefit. Spousal coordination is crucial, especially since early claims can also affect survivor benefit. Survivor benefit primarily impacts women, who outlive their husbands more often than husbands outlive their wives.
For many married couples, it makes financial sense for the higher earner to work longer than the lower earner. The compounded percentage of their benefit will translate to larger Social Security payments than if the lower earner worked for longer.
Returning to Work After Retirement
Sometimes, people retire, then decide to return to work.
That may be for personal reasons, or because they find they Social Security income isn’t enough to live on comfortably. They can return to work and keep applying working years towards their Delayed Retirement Credit and Social Security payment amounts.
The Social Security Administration has a protocol for this scenario, allowing the person to reenter the workforce and continue to apply years toward their Social Security Income payments.
In order to do “undo” their initial retirement and Social Security benefit claim, the retiree looking to reenter the workforce can file the Form SSA-521 Request for Withdrawal of Application form.
In this situation, there are three qualifying conditions.
- Applicant must repay all received amounts during their temporary retirement period. This includes spousal or survivor benefits and withheld Medicare Parts B, C, and D premiums.
- It has been less than one year since the original retirement and Social Security was claimed.
- The Applicant has never filed a SA-521 form before. The Form SSA-521 can only be filed once in a lifetime.
However, given that these three conditions are met, the benefits claim resets as if it never occurred.
Planning ahead
Understanding your full retirement age is crucial, as the decision to claim benefits affects both you and your loved ones. Understanding how these benefits work can help inform making decisions that will ensure maximum financial security in the Golden Years.
The SSA offers resources to estimate benefits, review earnings records, and provide other vital details about your Social Security benefits.
