Social Security timing strategies can make a meaningful difference in how much lifetime income you receive from this important program. Many people know Social Security will be part of their retirement, but far fewer understand how the rules, ages, and options really work or how those decisions affect a spouse or surviving spouse. Taking time to learn the basics can help you make more confident choices.
What Is Social Security?
Social Security is a federal program that provides income benefits to:
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Retirees
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People with qualifying disabilities
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Certain family members of workers who have passed away
Created in 1935 under the Social Security Act, it’s designed to replace part of your income when you retire or can’t work due to disability or death in the family. It’s not intended to be your only source of retirement income, but it is an important piece of many retirement plans.
How Is Social Security Funded?
Social Security is primarily funded through payroll taxes:
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FICA (Federal Insurance Contributions Act) for employees
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SECA (Self-Employment Contributions Act) for self-employed workers
Each year, there’s a wage cap and earnings above that cap are not subject to Social Security tax. Both the employee and the employer contribute 6.2% of earnings up to the cap. If you’re self-employed, you pay both halves (a total of 12.4%). Once wages go over the annual cap, the Social Security portion of your payroll tax stops. Please note: Medicare taxes continue).
Social Security operates as a pay-as-you-go system: today’s workers are essentially funding today’s retirees. Your contributions go into the trust fund, and benefits go out to people currently receiving Social Security.
Who Is Eligible for Social Security Retirement Benefits?
To qualify for Social Security retirement benefits, you need to have worked long enough in a job where you paid into Social Security. The system tracks your work history using “credits.”
Key points:
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You can earn up to four credits per year.
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The dollar amount needed for one credit increases over time with inflation.
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Most people earn all four credits by working part-time or full-time throughout the year.
To become eligible for retirement benefits, you need 40 total credits, which works out to about 10 years of work. These credits do not need to be earned consecutively—they accumulate over your lifetime. Once you’ve hit 40 credits, you meet the basic requirement for retirement benefits, but the amount you receive is based on your earnings history.
When You Can Start Social Security Benefits
Everyone has a Full Retirement Age (FRA)—the age when you’re entitled to your full Social Security benefit:
- If you were born in 1960 or later, your FRA is 67.
- If you were born before 1960, your FRA falls between 66 and 67.
You can start benefits as early as age 62, or delay all the way until age 70.
Here’s the tradeoff:
- Claim early (as early as 62):
- You receive benefits for more years,
- But you lock in a permanent monthly reduction, up to about 30% less than your full benefit.
- Delay benefits past FRA (up to age 70):
- You earn delayed retirement credits,
- Your benefit increases by about 8% per year you delay, up to age 70.
In general, the longer you wait (up to age 70), the higher your monthly benefit will be. The right choice depends on your health, other income sources, and overall retirement plan.
Why Social Security Timing Matters—Especially for Couples
For many households—especially married couples—the way you use Social Security timing strategies can significantly affect total lifetime income.
A few key points about spousal benefits:
- A spouse may be able to claim a benefit based on the other spouse’s work record.
- This can apply even if the spouse has little or no work history of their own.
- A spousal benefit can be up to 50% of the higher earner’s full retirement age benefit.
Timing matters because:
- If the higher-earning spouse delays benefits, their own benefit grows—and that may also increase what the surviving spouse receives later.
- If benefits are claimed too early, it can permanently reduce both the worker’s benefit and any dependent or surviving spouse benefits tied to it.
Coordinating Social Security decisions—who should claim first, how spousal benefits come into play, and how those benefits fit with your broader income plan—is one of the trickier but most valuable parts of retirement planning. Done well, it can help you make the most of this benefit over both spouses’ lifetimes.
Fitting Social Security Into Your Overall Retirement Plan
Social Security is a key piece of many retirement income plans—but it’s not a one-size-fits-all program. Your strategy should fit your broader plan, including:
- Savings and investments
- Pensions or other income sources
- Taxes and required minimum distributions
- Longevity and health considerations
- Legacy or estate goals
If your situation involves more complex factors—like divorce benefits, widow benefits, or concerns about Social Security’s long-term funding—it may be especially important to get personalized guidance. Having a clear strategy for Social Security timing and how it interacts with the rest of your plan can make a real difference for you, your family, and your legacy.
Next Steps
If you’re within 5–10 years of retirement—or already retired and wondering if you made the best Social Security decision—this is a good time to review how Social Security fits with the rest of your financial picture.
A coordinated retirement plan can help you:
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Make more informed decisions about when to claim
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Understand how spousal or survivor benefits affect your household
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Align Social Security with your broader retirement income strategy
If you’d like help evaluating your options, reach out to our team at Cornerstone Financial Solutions to start the conversation.
605-357-8553 in Sioux Falls
605-352-9490 in Huron
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Andrew Ulvestad and not necessarily those of Raymond James. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
