Social Security Considerations


As the last of the Baby Boomer generation approaches the minimum age to receive Social Security benefits, here are some points to understand before deciding to begin benefits.

How do I get the most money from the system?

While you can begin taking Social Security at age 62, each year you delay your decision will result in an annual benefit about 8% higher each year until age 70.  Many retirees tend to hold off until the age of 70, when they receive the maximum benefit amount.

However, that is not the right answer for many people.  Here are a few factors to consider when deciding on the age to begin collecting payments:

  • Personal health issues
  • Life expectancy in your family history
  • Varying tax rates on Social Security income
  • The need for IRA withdrawals or sale of non-retirement assets

Will Social Security run out of money?

No, not at this time.  The Social Security Administration has stated for years that it is taking in less money than it is sending in benefits.  With medical advancements and longer expected life spans, this not surprising.  The current law would reduce benefits about 24% if the fund runs out of money.  However, do you think members of Congress and the Senate would let that happen?

Can I live off Social Security?

Possibly.  Social Security was originally designed to be supplemental retirement income providing about one-third of your retirement living expenses.  Some people can live off the modest amount of benefits provided; but it depends on your lifestyle. Social Security is one piece of the retirement puzzle

What about inflation?

Social Security payments are designed to keep pace with the rise in the cost of living. Every year, the Social Security Administration evaluates inflation data and decides whether to institute a benefit increase called a cost-of-living adjustment (COLA). For 2024, Social Security benefits are set to increase by 3.2%, according to the Social Security Administration.

Will I outlive my Social Security benefits?

No.  You will receive payments every month until your death. Unlike other income streams, it has the backing of the federal government and is designed to keep pace with inflation.

Are Social Security benefits subject to income taxes?

Potentially – but 15% of your benefits are always income tax-free.  Depending on your other sources of taxable income, you may have to pay taxes on the income if your total modified adjusted gross income is above certain limits. Up to 85% of your Social Security benefits may be taxable, depending on the amount of income you have from other sources.  Approximately 40% of people who receive Social Security have to pay income taxes on their benefits, according to the Social Security Administration.