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Social Security: What You Need To Know Before You File

Social Security: What You Need To Know Before You File

By Jeremy Raffer


You’ve been paying into it for years. On your paycheck it appears as OASDI (Old-Age, Survivors, and Disability Insurance) and deducts 6.2% of the first $132,000 of income; your employer pays the same amount also each paycheck. Year after year, paycheck after paycheck, you pay into it. Once you start to close in on retirement, you start to wonder how much you’ll receive back and when. So instead of leaving yourself in the dark, let’s look at the various factors and stipulations surrounding Social Security benefits.

Social Security


Table Of Contents:

When Am I Allowed to Claim It?

When Should I Actually Claim It?

How much will I receive?

Spousal Benefits

Survivor Benefits





When Am I Allowed to Claim Social Security?

The earliest a person can start receiving Social Security benefits is at 62. At this age you’ll only receive 73.3% of your full benefit though because you “took it early.” Full retirement age is a sliding scale with 65 being the earliest and 67 being the latest--depending on when you were born. By pushing the age a little later each year they can stretch the funds longer. Currently, the age chart for collecting full social security is as follows:


when can I claim social security


The latest you can take your social security benefit is 70.


When Should I Actually Claim Social Security?

When to take social security is the million dollar question. Let’s say you’re 66 (full retirement age) and decide to take the monthly benefit; you’d bring in $1000 a month. If you claimed it earlier when you were 62, you’d see a 25% drop and only bring in $750 a month. So why the discrepancy? This is because the government must pay you 4 years longer than anticipated. So if you waited until 70 to take your benefit, it would increase 32% to $1,320. Essentially every year you wait, your benefit grows by approximately 7.35%. So again we’re back to our million dollar question: when should I claim it?


If you can afford to wait, social security grows at a respectable pace. Most 60-somethings aren’t earning the same rate on their investments because they’ve begun to dial back the risk as they approach retirement. This means you should put off claiming it as long as you can afford to--presuming you live long enough to break even.


If you take social security at 66 like in our above example, by the time you reach 80 you’ve received $168,000 in benefit. If you had waited until age 70 to claim it, by 80 you’d have received $158,500. So what should you do? This is one of those cases where you should take into account your families medical/longevity history. Essentially you need to make it to age 82 to benefit from having waiting until 70 to take your benefit. For most people this is no issue but if you are sick or have a family history of early death, you’ll want to take that into account and perhaps claim it earlier.


How Much Social Security Income Will I Receive?

In order to calculate how much you would receive, take your top 35 years of reported earnings and divide that number by 420--the number of months in 35 years; this will give you your average monthly earnings.


For example, let’s say you earned 50k every year of your entire life. $50,000 x 35 years = $1,750,000 total income. Now divide that by the number of months in 35 years, which is 420. $1,750,000 / 420 months = $4,166. $4,166 is your average monthly income over your working life.

social security planning

Now comes the mathy part. Of that $4,166, take 90% of the first $926, 32% of earnings between $926 and $5,583, and 15% of any earnings over $5,583. In our example that would be $833.4 + $1,036.8 = $1,870.2. So if you turned 62 in 2019 and were now full retirement age, you would collect roughly $1,870 per month.


It’s important to note that the tranches which are known as bend points (how they calculate your average income) change each year. So if you turned 62 in 2015 the bend points would be different than if you turned 62 in 2019. Also, this was a calculation for taking your benefit at age 66; you need to adjust for the cost of living as well as adjust for if you decide to claim it earlier or later than age 66.


If doing the math gets too complicated, you can just visit The Social Security Website where they will use your social security number to calculate it for you. Also, if you’re claiming your benefit and continue to work, you may be able to increase your benefit by driving up your average income.


Social Security Spousal Benefits

Spousal benefit means that you’re eligible to receive 50% of your spouse's’ benefits. In cases where one spouse earned significantly more than the other, or if one did not work, it can be beneficial to take the spousal benefit. Here’s how it works.


Let’s say my hypothetical wife will get $500 in benefit at age 66 because we had 4 kids and she raised them while I worked outside the home. My benefit at 66 is $2,500 monthly. If she elects to take the spousal benefit, then she would get half of mine which is $1,250 per month--much better than her $500. There are some things to be aware of though:


1) You have to have been married for 10 years and not remarried prior to 60.

2) You are not eligible to receive a spousal benefit until your spouse files for their own benefit--which means your spouse must be at least 62.

3) You will receive 50% of what your spouse would get at full retirement age (66-67).

4) If you collect spousal benefit it will permanently reduce your benefits. However, if at a later age like 70, your benefit is greater than the spousal benefit you’d been taking, you can switch back to your own for the win.


Social Secuirty Survivor Benefits

When you or your spouse pass, the survivor is entitled to receive whoever had the higher benefit. Also, if you become a widow or widower you can collect a survivors benefit as early as age 60. Later on if your benefit exceeds the survivors benefit, you can then switch back again.


Survivor benefits can also be claimed for minors and disabled children at a rate of 75% of their late parents’ benefit. Survivor benefits are also applicable to divorcees as long the marriage was longer than 10 years and they didn’t remarry prior to age 60. Interestingly enough, if you’d remarried after 60 and that marriage ends, eligibility resumes again. Survivor benefits can also go to one or both parents who were dependant on a deceased son or daughter at the rate of 82.5% for one parent and 75% for two.



Social Security is something you have no choice but to pay into for the entirety of your working life. When it's time to reap the benefits, there are a lot of moving pieces to be aware of. For most people, the generic advice is to wait as long as you can before claiming your benefits. However, there are a lot of special circumstances that one should consider and be aware of before making this decision. Make sure to work with your Financial Advisor to determine what strategy works best for you.


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Jeremy Raffer, MBA
Wealth Manager
Phone – 201-773-4641


Any opinions are those of Jeremy Raffer and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and  are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. All hypothetical examples are for illustrative purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.