There has long been political alignment on one thing: Cuts to Social Security are off the table. Most people also agree the program faces solvency issues and needs some tweaks to keep pumping out those checks.
Benefit cuts are political suicide. But here’s the problem: Elon Musk is not a politician. He is not facing reelection.
Recently, he stated the un-statable by referring to federal spending on entitlements as a “big one to eliminate.” The White House immediately defended the statement as referring to targeting waste, fraud and abuse, not necessarily the program itself.
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On top of all this, the Social Security Fairness Act, signed into law on January 5, has repealed the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
Essentially, this means increased payments to those who had reduced benefits due to having “non-covered” pensions.
As someone who fields a lot of Social Security questions from clients and the general public, I can tell you that people are on high alert. People want to make sure they’ll receive their money. I get it.
In general, though, we have not changed the strategies for our clients based on recent comments and policy changes. (I reserve the right to change that statement.)
So should you still wait until 70 to claim Social Security? In this article, I’ve outlined some rules of thumb for four different scenarios, using the best information possible, just to make sure you’re not making the absolute wrong decision.
A word of warning
The decision on when to take Social Security is highly personal. For the sake of this article, we are assuming that you have the choice to decide when to take it. You have enough money saved that taking benefits early won’t change how much you can spend — just where you’re spending it from. We are also assuming that you are Social Security-eligible (at least 62 years old).
People often oversimplify the decision by making health the only variable: Will you live long enough to make up for the payments you forgo by delaying?
However, beyond health there are other things that play a significant role, such as legacy, taxes, work status and marital status. We rely on financial planning software to offer a personal recommendation to each client. You can access a free version of that software online.
Scenario one: You and your partner both wait until 70
When you build a financial plan for a client with financial resources, this is often the “optimal” scenario because you’re unlikely to factor into a financial plan that someone is going to die before 80, a common “break-even point.”
However, this means you are making a bet that they will both live a long life and that the program will remain solvent for both of those long lives.
Every year the SSA releases the Trustees Report, which details the solvency of the system. The last one was released in May 2024, so the Social Security Fairness Act was not factored in.
The report highlighted that the projected year for depletion of the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds is now 2035, one year later than projected in the 2023 report. After 2035, it will be able to cover 77% of payments via payroll taxes collected. A new report will be out in May.
If this is too much for you to bear, you may consider having whichever spouse has the lower benefit claim early, with the higher benefit delayed until 70. This will hedge the longevity bet and allow the higher benefit to pass along if that spouse dies first.
Scenario two: You’re on your own
Individual decisions are easier to make because you do not need to consider the impact of your decision on spousal or survivor benefits. This is one where health is probably the biggest driver.
If you’re in poor health and think you won’t make it past your early eighties, you should probably claim benefits at full retirement age, or earlier.
If you think you’ll live long past 80, that’s a good reason to delay benefits all the way until 70. Each year you delay between full retirement age (FRA) and 70, your benefit increases by 8% or 0.66% per month. You do not need to wait a full year for your benefits to increase.
Scenario three: You’re still working
If you’re still working and are below FRA, I would almost never recommend claiming. If you’re under FRA, there is an earnings cap of $23,400 (2025 limit). You start to have your benefit reduced for earnings over that amount. In the year you hit FRA, that cap goes up significantly
Scenario four: You want to leave a significant legacy
You can pass an investment account to your kids. You cannot pass a Social Security benefit to your kids unless they are minors. Therefore, if you want to leave a significant nest egg at death, this could be a reason to claim early.
The math here will depend on the returns of those investments you’re passing along and how long you live. The general idea is that claiming early will allow you to give your investments time to grow.
If you don’t need to tap your investments during your lifetime, and you can stomach the risk, those accounts can be invested more aggressively.