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The Social Security Conundrum – Part I

This four-part series will help you understand the ins and outs of Social Security, including eligibility, when to collect, and what to collect.

In order to be eligible for Social Security, you need to work for 10 years. Specifically, you need to receive 40 credits, and you earn 4 credits for every year that you work. When you get to the point where you’re going to collect Social Security, it will be based on the highest 35 years of earnings. Many people believe that this is calculated based on the last 35 years of their life because it is usually the latter part of life that you earn high amounts of money.

However, those earnings have a limit. Every year there is a deduction from your paycheck that has a cap, which is currently at $127,920. It is also likely that the percentage will go higher in the future.

Going Broke?

Questions have been circulating on whether the Social Security System is going broke. While that is not likely going to happen, there could be changes with the earning limits. Politics have a hand in determining its future direction. Changes determined by politics can affect future benefits and it could happen in either this presidency or a future one.

Boosting Benefits

There are ways to boost your benefits and oftentimes people aren’t taking advantage of these opportunities. Those who are self-employed aren’t maximizing their Social Security through maximizing their Social Security earnings. Others may choose to boost their benefits by working more years, as most people likely make more money later in their career. This increase will directly affect Social Security. You can also opt to work during retirement and work well past the Social Security ages. These things will allow you to increase the calculation of your Social Security over your lifetime.

Collecting Social Security

In 2015, there were changes to Social Security laws which eliminated some of the available strategies. There are still a lot of decisions that can be made to help you get the most of your benefit. Collecting Social Security is something that’s determined by many factors; one being your health. If you believe you’ll be healthy well into your old age, then you may consider collecting it later. It’s a different conversation depending on how the person views their lifespan.

There are also two ways to collect Social Security: one at normal retirement age and another at full retirement age. For people born before 1960, it’s age 66 for normal retirement age. While for those born from 1960 onwards will be at age 67. If you opt to take your Social Security while you are still working, you would still give back money based on a calculation. It’s important to do these calculations because you may end up not getting any Social Security at all.

Spousal Benefits

There are a few different options available for collecting benefits when it comes to your marital status. You can collect your own benefit or under a spousal benefit. If you collect under your own benefit, you are basing it on your earnings during your lifetime. There’s a different calculation for collecting a spousal benefit, which can provide you with the possibility of collecting a higher amount of Social Security. You’ll want to take a look at both options.

If one spouse passes away, you can actually forfeit the lower Social Security of the two. You have a choice to collect the higher Social Security amount so it’s important to look at the calculation of both spouses. One strategy is to take one spouse’s Social Security early while the other waits until the age of 70 to bump up his/her Social Security.

Breaking Even

In determining when to collect your Social Security whether it is looking at your retirement age or spousal benefit, you may want to look at a breakeven analysis. If you take the amount at retirement age rather than full retirement age, how long would it take to break even? It may usually take more than a decade, so it’s good to consider it especially if you are wary of your life expectancy.

The reason why you’d want to wait until the full retirement age is that your security benefits are going up 8 percent which is a big amount considering how low interest our environment is currently. However, it does get psychologically taxing for people especially as they get older, worrying about whether or not they have enough time to take advantage of their Social Security.

Social Security as an Asset

Remember that Social Security is an asset that will help your future income stream, so we make calculations on when to take Social Security and whether or not to take the spousal benefit. An issue that Social Security has today is that a lot of people aren’t educated on it and don’t understand how it works. People take their Social Security as they please and it could become detrimental. They could be missing out on getting more benefits.

The strategies discussed here can depend on a variety of factors, and may also differ a bit depending on where you are located in the US. It’s important to start planning strategies for Social Security so you don’t miss out on money you may be forfeiting without knowing about it.

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Larry Heller, Not Your Average Advisor.


A CFP® (Certified Financial Planner) and a former CPA.

Has helped solve complex financial planning for 20+ yrs.

Member of Wealth Management Think Tank.

A financial advisor think tank that meets monthly to discuss investment strategies and planning opportunities.

Larry is approached regularly by the respected journals.

“Journal of Financial Planning”, and “The Wall Street Journal”.