When to Take Social Security, and Other Questions to Ask Before Retiring

Not too long ago, people took their Social Security benefits as soon as they retired. They didn’t think about how waiting to take Social Security could increase their benefit, they just applied for benefits as soon as they could.

Thankfully, today people are more savvy about Social Security. They are asking how they can maximize their benefits rather than just asking when they can take Social Security. And that’s great, because with the demise of pension plans and as volatile as the stock market is today, you need to maximize the income you will receive during retirement as much as possible.

Here are some factors to consider before deciding when to take Social Security:

How long do you plan on working?

This is an important question because you are limited in how much you can earn if you collect benefits before you reach your full retirement age (FRA).

Your FRA is based on your year of birth. You can find your FRA here: http://www.socialsecurity.gov/retire2/agereduction.htm

If you are under your FRA and you plan on continuing to work, your Social Security benefits will be reduced if you earn over a certain amount. In 2014, you can earn up to $15,480 before any of your Social Security benefits will be reduced. If you earn over that amount, you will have to pay back $1 for every $2 above the limit. Once you reach your FRA, this limit no longer applies and you can earn as much as you want without penalty.

Another point to keep in mind if you plan on working while you are receiving Social Security benefits is that your benefits could be taxable. Generally, Social Security is not taxable if that is your only income; however, if you have other income, whether from wages, investment income, a pension, etc., you could pay taxes on up to 85% of your Social Security benefits. Depending on what tax bracket you are in, this alone may be a good reason to delay benefits until you have stopped working.

Related: Do You Have to Pay Tax on Social Security Benefits?

How is your health?

If you are in poor health and you are single, then you may want to apply for Social Security retirement benefits sooner rather later. After all, you earned those benefits and want to collect them while you can.

But what if you are healthy and can expect to live a long life? If you have enjoyed good health and your parents or other family members have lived long lives, then it can pay to delay your Social Security benefits to increase the amount you will collect in your later years.

Are you married or do you have dependent children?

Social Security isn’t just about you. If you have a family, it could affect your spouse and children too.

If you are married, your Social Security benefit becomes the basis for survivor benefits. The higher your benefit is, the higher the benefit your spouse and other survivors (dependent children) will receive. The survivor benefit is calculated as 100% of the amount you are collecting when you pass away (if you aren’t collecting benefits yet, it is 100% of your PIA). If you take your benefits early, you are not only reducing your own benefit, you are reducing the benefit that your survivors will receive.

Related: What You Don’t Know About Social Security Spousal Benefits Can Hurt You

Are you worried about outliving your nest egg?

One of the biggest fears that people have (even more so than dying) is the fear that they will outlive their money. By maximizing the income you will receive from Social Security, you can reduce the risk that you will outlive your money.

Here’s an example:

John is age 61 and he is deciding when to take social security. Here are the numbers from his Social Security statement showing what he will get at which age:

  • Age 62: $1,350
  • Age 66: $1,800
  • Age 70: $2,376

Also important is how much John will be spending during retirement. Let’s assume for this example that John is very frugal and he only needs $2,000 per month to live on.

If John retires at 62, his Social Security benefit will cover only 67% of his living expenses. If he retires at 66, his benefits will cover 90% of his living expenses, and if he waits until age 70 his retirement benefit will cover all of his living expenses with a little left over.

As you can see, if John retires early, he’s going to have to dip into his retirement nest egg quite a bit to cover living expenses. The longer John waits to retire, the less money he will have to take out of his retirement funds to help cover living expenses.

This is a simplistic example in that it doesn’t take inflation into account. With living expenses rising faster than increases in Social Security, the difference in benefits (and how far they will go to cover your monthly expenses) is much greater.

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What You Don’t Know About Social Security Spousal Benefits Can Hurt You

social security spousal benefitsThere’s been a lot of talk lately about Social Security filing strategies, specifically strategies around Social Security spouse benefits.

And for good reason; one of the many benefits of being married is that you may be able to collect Social Security benefits based on your spouse’s earnings, even if you didn’t work enough to qualify for Social Security retirement benefits on your own.

Related: Can a Home-Maker Collect Social Security?

This can be a great tool to help you maximize your family’s total Social Security benefits.  However, most people don’t understand how spousal benefits work.   And making the wrong decision can cost you tens of thousands (even hundreds of thousands) of dollars over your lifetime.  Here are some key facts you should know about Social Security spouse benefits.


When Social Security was first created in 1935, it only provided retirement benefits, and only the person who worked and contributed to Social Security received any benefits.  While this was a huge help, especially given that this was during the Great Depression, there was still a considerable financial burden for workers with dependent family members and for widows (who received nothing under the original act if their husband passed away).

One of the first amendments was to add spousal and survivor benefits.  This shifted the focus from just a retirement program to a family based program.


When you collect Social Security spouse benefits, you generally receive 50% of the amount your spouse would receive at their full retirement age.  This is known as their primary insurance amount (PIA).

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Social Security Benefits to Increase 1.5% in 2014

The Social Security Administration (SSA) has announced that Social Security benefits will increase by 1.5% in 2014.

While this is one of the smallest increases since the COLA was first implemented in 1975, it’s better than the 0% increase we saw in 2010 and 2011.

Here is a quick review of the cost of living increases since 2001:

January 2001 — 3.5%
January 2002 — 2.6%
January 2003 — 1.4%
January 2004 — 2.1%
January 2005 — 2.7%
January 2006 — 4.1%
January 2007 — 3.3%
January 2008 — 2.3%
January 2009 — 5.8%
January 2010 — 0.0%
January 2011 — 0.0%
January 2012 — 3.6%
January 2013 — 1.7%

The COLA is calculated based on the change in consumer prices in the 3rd quarter of the current year compared to the third quarter of the previous year.  Gas prices have gone down 2.4% from a year ago, which is the biggest reason for the smaller COLA for 2014.   Food prices have only seen a small increase from last year, while utilities and housing are both up over 2%.

Social Security COLA going up only 1.5% – CNBC.com

The increase was small because consumer prices, as measured by the government, haven’t gone up much in the past year.

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Do You Have to Pay Tax on Social Security Benefits?

tax on social security

Many people are upset to learn that they may owe tax on Social Security benefits they receive. After all, they paid Social Security taxes on their income the whole time they were working, why should they now have to pay taxes on their Social Security retirement income?

Before you get too upset, you have to have significant other income before your Social Security benefits become taxable.

If Social Security is your only retirement income, chances are you won’t have to pay any taxes on your benefits.

However, if you have other income from pensions, deferred compensation, or if you have a lot of investment income, then you may find that some of your Social Security benefits are taxable.

Here’s how it works: Depending on how much other income you have, up to 50% or even up to 85% of your benefits may be taxable.

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10 Strategies to Maximize Your Social Security Income

social security income


Want to learn more?  Grab the free report “10 Strategies to Maximize Your Social Security Income” today!


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Non-Working Spouse: Can a Homemaker Collect Social Security?

social security homemakerOut of all the questions I get regarding Social Security, spousal benefits rank the highest. And the most common question I hear about spousal benefits is “can my wife collect Social Security if she has never worked”?

When Social Security was first created, non-working spouses did not receive any benefits. However, it didn’t take long for the Social Security Board to realize that this caused financial hardships for families when the worker died before the non-working spouse.

In 1939, spousal and survivor benefits were added to provide monthly benefits to qualified spouse and survivors of workers.

While the family structure has changed a lot since then, there are still many households where one spouse (usually the wife) has stayed out of the work force to raise a family.

In many cases, the homemaker doesn’t qualify for retirement benefits because she hasn’t worked the 40 quarters required to receive retirement benefits, or she hasn’t worked at all.

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Fixing Social Security: Obama’s New Index Calculation

Social Security COLAYou’ve probably heard by now that President Obama has recommended that the cost of living adjustment for Social Security be adjusted.  This is just one of many proposals included in the president’s 2014 budget.

To give you a little background, Social Security benefits are adjusted each year for inflation.  This is a huge benefit as it allows your income from Social Security to rise as the cost of food, utilities and other basic living expenses go up.

Currently the cost of living adjustment (COLA) is based on the consumer price index for urban wage earners and clerical workers (CPI-W).  The proposal is that the COLA be tied to the chained CPI instead.  The problem with this is that the chained CPI has increased at a slower rate than the CPI-W, so Social Security benefits would increase at a slower rate if this change is allowed.

As expected, those who want to reduce the deficit are in favor of this adjustment, while seniors who rely on Social Security are against it.

Here are just a few of the arguments for and against that I have seen recently:

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What is Social Security?

social security check

photo credit: ssa.gov

Before we dive into some detailed discussions about how to maximize your Social Security benefits, I wanted to give you a primer on what Social Security is, including who qualifies for benefits, how much you can receive, how old you have to be to collect benefits and more.

What is Social Security?

Social Security was created in 1935 to provide financial security to Americans. While the program was originally designed for retired and unemployed workers, people who are disabled may also receive benefits. In addition, families of retired, deceased or disabled workers may also qualify for benefits.

Who Pays for Social Security?

Social Security is not a federally funded program; it is funded entirely by payroll taxes. Employees and employers both contribute 6.2% of the worker’s earnings to Social Security, for a total of 12.4%.

Self employed individuals pay both the employee and employer share.

Who Can Receive Social Security Benefits?

We will discuss who qualifies for Social Security in much more detail in future articles, however, in general, the following people may qualify for Social Security benefits:

  • Retirees
  • Spouses of retirees
  • Widows and widowers
  • Dependent children of retired and deceased workers
  • Disabled people

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Social Security: A Brief History

Social Security history

photo credit: ssa.gov

Before we dive into strategies to maximize your Social Security, I thought it would be interesting to see how Social Security got started.

Social Security was originally created in 1935 and has been amended several times since then.

It was created as part of the New Deal by President Franklin D. Roosevelt after the Great Depression of the 1930s caused millions of seniors to become impoverished.

The original program provided benefits for retirees and the unemployed. Death benefits were also available, however spousal and disability benefits didn’t come until later amendments to the program.

Before Social Security, there were “Poor Laws” to provide relief to the poor, but the laws were very discriminatory and the relief provided was made as unpleasant as possible to discourage people from depending on it.

Pensions were created during the Civil War which provided some economic security for military personnel, but these pensions did nothing to help the general population.

To help provide financial security to the general population, specifically the elderly and the unemployed, the Social Security Act was created.

Social Security is funded through payroll taxes. The first payroll taxes were collected in 1937. Just like today, the worker contributed half and the employer contributed half.

When Social Security was first created, only the workers who paid in received benefits. Payments could be received for retirement or if you were unemployed. You had to be 65 to receive retirement benefits under the original act.

Amendments have been made over the years to allow spouses to collect benefits (both retirement and survivor benefits), to add disability benefits, to change the date that a worker can first apply for retirement benefits, to adjust benefits for inflation each year, and much more.

The first Social Security payment was made to Ernest Ackerman, who retired just one day after Social Security began. He received a lump sum payment of seventeen cents. The first monthly payment was made to Ida May Fuller, who continued to collect benefits until her death at age 100. Her first payment was for $22.54; she collected a total of $22,888.92 over her lifetime.

If you’re a history buff and would like to learn more about the history of Social Security please visit http://www.ssa.gov/history/.

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Welcome to the Social Security Coach Website!

Thanks for visiting the new Social Security Coach website!  This website was created to answer the many Social Security questions that baby boomers face as they prepare for retirement.

In the past, most people signed up for Social Security as soon as they were eligible, or as soon as they retired, without much thought for whether that was actually the best time to take benefits or not.

That may have worked for your parents and grandparents, but that won’t work for today’s retirees.

Why? Well, the retirement picture has changed over the years. It used to be that you could rely on three sources for your retirement income: pensions, savings and Social Security.

Unfortunately, pensions are disappearing very quickly as companies freeze or eliminate pension plans in an effort to cut costs. Unless you work for the government, or you are a long-time employee of a company that hasn’t slashed their pension program, you probably won’t receive a pension when you retire.

Second, the savings rate in America has gone down considerably in the past few years. One of the biggest reasons is the volatile stock market. People are just too scared to invest when the stock market can gain or lose 100 points in just one day!

So that leaves Social Security. And while Social Security is not meant to replace your entire income when you retire, you can see that it’s a much more important part of your retirement than most people give it credit for.

In fact, the Social Security Administration says that of the people who receive retirement benefits, Social Security makes up at least half of their income. And for some people, Social Security makes up over 90 percent of their income!

With so many people relying on Social Security for most of their income retirement, don’t you think you should learn how to maximize your benefits as much as possible?

The goal of this website is to educate you about Social Security as much as possible so that you can make the best decision when it’s your time to retire.

Social Security is a very complex program, so I’ll be discussing many topics, such as who is eligible for benefits, when you can retire, all about spousal benefits, who qualifies for survivor benefits, and much more.

Do you have a question about Social Security, or a topic you’d like to see covered? Please feel free to post your question in the comment section below! Thanks for stopping by!

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