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Top questions about Social Security

Learn how to maximize your Social Security benefits.
Commentary by
8 minute read
July 18, 2023
Social Security
Drawing Social Security
Retirement income
When to take Social Security

For most Americans, Social Security represents a significant source of retirement income. In fact, the Social Security Administration (SSA) reports that Social Security benefits make up about 30% of retirees' income.*

When to start taking Social Security and when to retire are interconnected decisions, but they have different implications depending on your personal circumstances, timeline, and goals. Being strategic about taking Social Security can help you optimize future payments and obtain greater peace of mind.

Investors also report increased peace of mind regarding their financial future when working with an advisor.** As a financial advisor, I help my clients think strategically about Social Security, as well as their overall goals for their retirement plans. 

3x as many investors report having peace of mind when working with an advisor.**

Here are the top questions my clients ask about Social Security:

When can I collect Social Security benefits?

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 just because you can collect payments immediately doesn't mean you should. Your personal strategy to get the most out of Social Security should depend on many factors, which we'll discuss more later.

How much are Social Security payments?

Your benefits are based on the payroll taxes you and your employers pay. Those taxes come out of your earnings, so 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 2023 was about $3,627 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.

Many people think when to start taking Social Security is a straightforward decision—and not surprisingly, a lot of them choose to take it as soon as possible. However, being strategic about taking Social Security can help you optimize future payments and obtain greater peace of mind.

—Ed Campagna, CFP®, Senior Financial Advisor

Factors that can affect your strategy

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

Your health status

How many years do you think you'll collect benefits?

Your savings

Can you spend from savings while letting your benefits continue to increase?

Your marital status

Can you claim benefits under your spouse's or former spouse's earnings?

Other retirement income

What other sources of guaranteed, cost-of-living adjusted income will you have?

Your retirement age

How long do you plan to work and how much will you earn?

Need help with your Social Security strategy? Our advisors are here for you.

How can I increase my Social Security benefits?

The easiest way to increase your monthly payments 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.

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 continue to grow. 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. A financial advisor can run different scenarios to help you understand the potential implications.

What else affects my Social Security payments?

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 people who receive benefits pay taxes on them.* And some states tax Social Security benefits too.

Medicare deductions. If you're claiming Social Security and 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.

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 $21,240 per year (as of 2023) without having your Social Security payments reduced. Bad news: If you earn over this 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: $56,520 for 2023.

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

Ready to set your Social Security strategy?

Working with Vanguard Personal Advisor® gives you anytime access to advisors who are fiduciaries—always acting in your best interest. We'll help you put together a Social Security strategy that makes the most of your benefits.

Start planning today

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*Source: Social Security Administration.

**Source: Vanguard, Quantifying the Investor's View on the Value of Human and Robo-Advice (Paulo Costa, Ph.D., and Jane E. Henshaw, 2022). Advised investors were asked about their level of peace of mind with the advisor as well as how much peace of mind they imagined having on their own. They could rate peace of mind from 0 ("No peace of mind at all") to 10 ("A great deal of peace of mind") and were considered to have peace of mind if their rating was between 8 and 10. When investing on their own, 24% reported having peace of mind. When investing with an advisor, 80% reported having peace of mind. 

All investing is subject to risk, including the possible loss of the money you invest.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Vanguard does not provide legal or tax advice. This information is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Vanguard cannot guarantee that this information is accurate, complete, or timely. Vanguard makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax positions taken in reliance on, such information. We recommend that you consult a tax or financial advisor about your individual situation.

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