So, what’s Social Security really worth? Let’s break down the strategies, pitfalls, and key decisions that could dramatically change your retirement outcome.

The Critical Role of Social Security in Retirement Planning

Social Security was never designed to be your only source of income in retirement—it was meant as a supplement. Yet, for many, it’s the cornerstone of their retirement strategy. This makes understanding its benefits, claiming strategies, and tax implications absolutely critical.

With the right approach, you can significantly increase the value of your benefits over time. Get it wrong, and you could leave tens of thousands—or even hundreds of thousands—on the table.

Types of Social Security Benefits You Need to Know

Social Security is more than just a monthly check:

• Retirement Benefits – The standard benefit based on your 35 highest-earning years.
• Spousal Benefits – Allows you to claim up to 50% of your spouse’s benefit, even if divorced, as long as you were married for at least ten years.
• Survivor Benefits – Provides the higher of two benefits to a surviving spouse, ensuring income continuity.
• Disability Benefits – Available for those who are unable to work due to a disability.
• Supplemental Benefits – For individuals 65 and older with limited income and resources.

Understanding which benefits apply to you—and how to maximize them—can make a massive difference in your long-term income.

How Social Security Is Funded

Social Security is funded through payroll taxes:

• 6.2% for Social Security and 1.45% for Medicare, for a total of 7.5% from both employees and employers.
• Self-employed individuals pay the full 15%, covering both portions.
• Taxes are applied up to an income threshold of $168,600; after that, only Medicare taxes are withheld.

The system is designed to be self-sustaining, but it’s no secret that the long-term solvency of Social Security is often debated.

Understanding Full Retirement Age and Claiming Strategies

Your Full Retirement Age (FRA) depends on your birth year:

• If born before 1937, your FRA is 65.
• If born after 1960, your FRA is 67.

Here’s the catch: claiming benefits before your FRA reduces your monthly payments. Wait until age 70, and you get an 8% boost per year past your FRA. This means your monthly check could be 32% higher than if you claimed at age 67.

This makes the decision to wait—or claim early—one of the biggest financial choices you’ll make.

Taxation of Social Security Benefits

Social Security benefits can be taxed—up to 85% of the benefit—depending on your provisional income, which includes:

• Adjusted Gross Income (AGI)
• Half of your Social Security benefits
• Non-taxable interest

The thresholds are:

• $32,000 for married couples
• $25,000 for singles

One strategy to reduce taxation: Roth IRA distributions are not included in provisional income, making them a powerful tool to manage your tax burden.

Working While Claiming Social Security

You can work while claiming Social Security, but there are earnings limits:

• Before FRA: $1 is deducted for every $2 earned above $22,000.
• In the year you reach FRA: $1 is deducted for every $3 earned above $60,000.
• After FRA: There are no earnings limits.

The good news? Any money withheld gets recalculated and added back after you hit your FRA.

The Case for Suspending Your Benefits

If you reach your FRA and want to boost your benefits, you can suspend them. For every year you wait, your payment increases by 8%. This strategy:

• Boosts future income
• Increases survivor benefits for your spouse
• Potentially adds tens of thousands to your total lifetime payout

However, suspending benefits also suspends payments to anyone claiming on your record, including spousal benefits.

Break-Even Analysis: When Waiting Pays Off

The question many ask: When does it make sense to wait?
The break-even age typically falls between 78 and 82. If you live past this age, you come out ahead by delaying benefits. If you’re in good health and have a family history of longevity, waiting is often the smarter move.

Social Security and Pensions: What You Need to Know

Receiving a pension doesn’t automatically reduce your Social Security—unless you’re subject to the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO):

• WEP reduces benefits for those with non-Social Security-covered pensions.
• GPO reduces spousal and survivor benefits for those with government pensions.

Knowing how these rules apply can help you avoid surprise reductions.

Medicare Enrollment and Social Security

If you’re already collecting Social Security when you turn 65, you’re automatically enrolled in Medicare Part A and B. If not, you need to sign up manually. Miss the deadline? You’ll face permanent penalties.

The exception: if you have employer-sponsored insurance, you may be able to delay Medicare without penalty.

Maximizing Your Social Security Benefits

To get the most out of Social Security:

• Wait until age 70 if possible.
• Work at least 35 years—any year you don’t work counts as zero in your calculation.
• Use Roth IRA distributions to manage taxable income.
• Strategize around spousal and survivor benefits to maximize household income.

Final Thought: What’s Social Security Really Worth?

For many Americans, Social Security isn’t just part of the plan—it is the plan. Understanding how to maximize it can mean the difference between getting by and living comfortably in retirement. With smart planning, you can unlock the full value of your benefits and ensure you’re not leaving money on the table.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post What’s Social Security Really Worth to You? appeared first on ROI TV.

1. What Is Your Full Retirement Age (FRA)?

Your Full Retirement Age (FRA) is the age when you can start receiving your full Social Security benefits without any reductions. It depends on your birth year:

• Born 1943-1954: FRA is 66 years old
• Born 1955-1959: FRA increases by 2 months each year (e.g., 66 and 2 months for 1955, 66 and 4 months for 1956, etc.)
• Born 1960 or later: FRA is 67 years old

Understanding your FRA is crucial because taking Social Security before this age leads to a permanent reduction in benefits.

2. How Social Security Benefits Are Calculated

Your Social Security benefit is based on your highest 35 years of earnings. Here’s how your monthly check changes depending on when you claim:

At Full Retirement Age (FRA): You receive 100% of your benefit (e.g., $2,000/month if that’s your calculated FRA benefit).

Claiming Early (as soon as 62): Benefits are reduced by 6% per year before FRA, up to 30% total if taken at 62.

• Example: If your FRA benefit is $2,000 per month, taking it at 62 reduces it to $1,400 per month.

Delaying Past FRA (until 70): Benefits increase by 8% per year until age 70.

• Example: Waiting until 70 increases a $2,000 FRA benefit to $2,480 per month.

If you expect to live past 78, delaying benefits usually results in more total lifetime Social Security income.

3. Working Before FRA: The Social Security Earnings Test

If you claim Social Security before full retirement age and continue working, your benefits may be temporarily reduced based on your income.

2025 Social Security Earnings Test Limits

If you earn above certain thresholds, Social Security withholds part of your benefits:

Before the year you reach FRA:

• Earnings limit: $23,400
• Reduction: $1 deducted from benefits for every $2 earned over the limit

The year you reach FRA (until your birthday month):

• Higher earnings limit: $62,160
• Reduction: $1 deducted for every $3 earned over the limit

After Full Retirement Age:

• No earnings limit – You can earn unlimited income without any benefit reduction.

What Income Counts?

Counts toward the earnings test:
Wages (W-2 income)
1099 self-employment income
Net earnings from a business

Does NOT count toward the earnings test:

Pension payments
401(k)/IRA withdrawals
Investment income (dividends, capital gains)
Rental income
Unemployment benefits

4. How the Earnings Test Works (And Why It’s Not a Tax)

If your earnings exceed the Social Security income limits, your benefits aren’t lost forever—but they are temporarily withheld until you reach FRA.

For example:

• You are 63 years old, receive $1,500 per month ($18,000 per year) in benefits, and earn $33,400 from a job.
• This is $10,000 over the earnings limit.
• Social Security withholds $1 for every $2 over the limit = $5,000 withheld from your benefits.

Instead of losing it, Social Security recalculates your benefits at FRA, slightly increasing your monthly check to account for months when payments were withheld.

5. Should You Claim Social Security While Working?

You should claim early if:

• You need the extra income to cover expenses.
• You don’t expect to live past 78 (health issues, family history, etc.).
• Your job earnings stay below the earnings test limit.

You should delay claiming if:

• You expect to live a long time (longer life = more total benefits from delaying).
• You earn significantly over the earnings test limit (your benefits would be withheld anyway).
• You want to maximize survivor benefits for your spouse.

Final Thoughts: Plan Smart to Maximize Your Benefits

If you’re planning to work while collecting Social Security, understanding the earnings test is key to avoiding unnecessary reductions in your benefits. Before making a decision, evaluate your income, tax situation, and long-term financial goals.

Need help deciding when to take Social Security? Drop a comment below! I’d love to hear your thoughts and experiences.

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