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For most Americans, Social Security represents a significant source of their retirement income. In fact, the Social Security Administration (SSA) reports that benefits make up about 33% of seniors' income.*

Many people approach when to start taking Social Security as a straightforward decision—and not surprisingly, a lot of them choose "as soon as possible"—but you can and should be strategic about it to make sure you're getting everything you're due.

As a financial advisor, I help my clients think more strategically about how Social Security fits into their overall retirement plan. Here are the top questions clients ask about Social Security:

When can I collect Social Security?

To collect, you need to be 62 or older and have paid into Social Security through your payroll deductions for a minimum of 10 years.

But as with many things in life, just because you can doesn't mean you should. Your personal strategy to get the most out of Social Security depends on many factors.

How much Social Security will I get?

Your benefits are based on the payroll taxes you and your employers pay. Since those taxes come out of your earnings, the higher your earnings, the greater your benefits.

Even for top earners, however, the benefits are relatively moderate. The maximum Social Security benefit as of June 2020 was about $3,000 a month at "full retirement age"*—more about that below.

I recommend my clients get an estimate of what their benefits will be long before they apply for them, so we can start to plan how to maximize them.

When to take Social Security seems like a straightforward decision, but you can and should be strategic about it—make sure you're getting everything you're due.

Factors that can affect your strategy

You should carefully consider the following questions to decide your best Social Security strategy:

Health status: How many years do I think I'll collect benefits?

Marital status: Can and should I claim benefits under my spouse's or former spouse's earnings?

Retirement age: How long do I plan to work and how much will I earn?

Savings: Can I spend from savings while letting my benefit continue to increase?

Other retirement income: What other sources of guaranteed, cost-of-living adjusted income will I have?

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How can I increase my Social Security benefits?

The easiest way to increase your monthly payment is to delay collecting. You won't get 100% of your benefits unless you wait until your "full retirement age" to claim. After your full retirement age, your benefits will keep increasing by 8% a year for each year you wait until you turn 70.

Full retirement age is based on your birth date. If you were born in or after 1960, for example, your full retirement age is 67.

View our introduction to Social Security Open PDF document in a new window

But there are other potential ways to increase your benefits as well.

If you're married. You and your spouse should coordinate your claims to maximize the benefits. Whether you claim at the same time or use a split strategy to claim at different ages, it usually makes sense for the higher earner to wait longer to collect. Over time, the higher earner's increases will be worth more.

If you're divorced and haven't remarried. You may be eligible to claim benefits on your ex's earnings record if you were married at least 10 years.

If you're a surviving spouse. You can claim survivor benefits as early as age 60, if your spouse's earnings qualified them for Social Security. You also have the option to switch to your own benefits when you reach age 62 or older, if that strategy makes sense for you.

If you've started taking Social Security before full retirement age. Maybe you realized you'd be better off letting the benefit keep growing. Or, perhaps you decided to return to work, or don't need the money for another reason. Here are 2 ways you can undo your decision, to some extent:

  • Withdraw your application and pay back what you received. You can do this if it's been less than a year since you filed for benefits.
  • Suspend your benefits once you've reached full retirement age. This is your option if it's been over a year since you filed. Your benefit amount will increase every year until you turn 70 or start to collect again.

Some of these strategies can be complicated and some—like withdrawing your application—can only be done once, so you want to make sure you get them right. We can run different scenarios to help you understand the potential implications.

What else affects my Social Security payment?

While you're strategizing ways to increase your benefits, keep in mind these things that can decrease them:

Taxes: Retirees with moderate or higher incomes will likely end up paying federal taxes on some portion of their benefits. According to the SSA, about 40% of the people who get benefits pay taxes on them.* And some states tax Social Security, too.

Medicare deductions: If you're claiming Social Security and also apply for traditional Medicare, the premiums from Medicare Plan B will be deducted from your Social Security payments.

Certain pensions: If you received a pension from a government entity or another organization that didn't withhold Social Security taxes, your benefits could be reduced. This could also affect any spousal benefits you might claim.

Earnings if you keep working: Depending on your age, if you're working and also collecting Social Security, your benefits can be decreased if you earn over the set limits.

States that tax Social Security income

Map of United States highlighting states that impose state income tax on Social Security benefits. They are: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, West Virginia

How much can I earn while on Social Security?

Once you've reached full retirement age, you can earn as much as you want with no penalties.

Before your full retirement age, you can earn up to $18,240 per year (as of 2020) without having your Social Security payments reduced. Bad news: If you earn over the limit, your benefits will be cut. Good news: When you reach full retirement age, any withheld benefits will be returned to you in the form of higher monthly payments.

If you're within the calendar year when you'll achieve full retirement age but haven't reached your birthday month yet, the earnings limit is much higher: $48,600 for 2020.

You can go to our Retirement Planning section to learn more about maximizing your Social Security benefits.

Find out more about Social Security

*Source: Social Security Administration.

Senior Financial Advisor Kevin Miller

Kevin E. Miller

Kevin is a Certified Financial Planner™ (CFP®) professional with Vanguard Personal Advisor Services®. He joined Vanguard in 2005 and has been providing financial advice to clients since 2014.

Kevin earned a BA and MBA from The Pennsylvania State University.

When he's not helping his clients plan for retirement, Kevin enjoys reading and spending time with family and friends.

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