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5 Key Principles of Social Security

| January 30, 2023

I recently read that nearly 30% of Social Security recipients begin their benefits at age 62 – the earliest possible starting point – making it the most popular starting age. According to the same piece by AARP, “well over half” claim before their full retirement age (FRA) and less than 10% wait until age 70 when they could max out their monthly benefit. The article, which you can access here, looks at six reasons they believe early claiming is most common. I believe all of these have some validity. I would add a seventh, which is simply “Not fully understanding the very complex system” (you might argue this is just a different way of saying their point #5, which is “Heard it from a friend”). This is NOT to say that delaying is the optimal approach for everyone, despite what you might read. There are many cases in which claiming early (or simply at your Full Retirement Age) makes a ton of sense. We just want to make sure that the decision between the two is made from an informed position, rather than out of fear or misunderstanding – so we’re going to look today at a few key points we hope will give you a leg up in making an informed decision.

Having advised many clients on Social Security claiming strategies (and attended far too many continuing ed sessions on the same), I have come to understand a few things:

  1. These claiming strategies are best evaluated in the context of a comprehensive financial plan. Simply calling the Social Security office and asking what is best is not always going to yield the optimal results, as that expert on the other end simply does not know your overall financial picture. You must factor in other assets, income streams, expense demands, expected longevity, and more to determine the optimal claiming strategy.
  2. Social Security is (needlessly) complex. The fact we’re having to write this blog and have these conversations is indicative of this fact. There are so many ways to approach this, and the underlying calculations are obscure.
  3. There are some core principles that everyone needs to be familiar with. While things are complex, understanding a few key concepts can meaningfully improve your ability to discern the optimal claiming strategy and make you a more educated consumer when you call Social Security to execute your plan.

It’s this third point that we’re going to focus on today. After all, we can’t do anything about #2, and we hope you have already engaged with us around #1 (if not, consider this your invite). So, without further ado, here we go…

To make this most effective, we are going to look at an example that we’ll carry through all five principles. Here are the key variables for this married couple:

Mary, Age 63, Full Retirement Age benefit $3,200/mo ($38,400/yr)

Joseph, Age 60, Full Retirement Age benefit $1,000/mo ($12,000/yr)

Full Retirement Age (FRA) for both is age 67

Both are still actively employed

1. The lower-earning spouse is entitled to the greater of their own benefit or 50% of the primary earner’s benefit. In our example, Mary was the higher-earning spouse and her FRA is $38,400. Joseph’s is $12,000. In this case, Joseph would receive $19,200 (50% of Mary’s) once he starts claiming spousal benefits. If Joseph’s own benefit was $1,601 or more per month, he would simply take that, and spousal benefits would not come into play for this couple.

2. When the first spouse dies, the surviving spouse is entitled to the higher of the two benefits (but not both), so the household effectively receives a pay cut upon first death. Let’s assume Mary dies first. In this case, Joseph switches from $19,200 to $38,400 per year when Mary dies – but does not get $57,600 per year.  If Joseph died first, Mary would simply continue receiving her benefit while Joseph’s would terminate. In other words, the family gets a 33% pay cut in either scenario (This is a real problem for those who rely too heavily on Social Security income, as household expenses don’t typically drop by 33% when one spouse dies).

3. Your benefit increases by ~8% per year for each year you delay past FRA and reduces by an equivalent amount for each year to take benefits early.  The change is permanent, which plays into item #2 above. If Mary were to die first and she had waited to take benefits at age 70, Joseph would receive ~$47,616 per year for the remainder of his life (rather than $38,400)

Note that the spousal benefits are capped at 50% of the FRA amount (technically called the ‘primary insurance amount’) of the higher earning spouse. They do not increase by 8% annually if the higher earning spouse opts to delay their own benefit. In other words, let’s say Mary waits until age 70 and received the aforementioned $47,616. Joseph’s spousal benefit would NOT equal $23,808 but would instead remain at $19,200.

4. You cannot start spousal benefits until the primary earner starts taking benefits, but you can take your own benefit at any time (after reaching 62).  This one can get a little complicated to try to explain broadly, so, in the interest of brevity, I am just going to refer you to this link to learn more. Of course, reach out if you want help understanding this important concept as it applies to your situation.

5. Taking benefits while still working and not yet at your FRA is generally a bad idea, so don’t start taking early benefits if you suspect you may go back to work later on (the decision to start SS benefits should be viewed as irrevocable…as you can revoke it within 12 months but will be forced to payback all benefits received until that date). If you take benefits before your FRA and are still working, your benefits will be subject to an earnings test. In all full years before you reach your FRA, any earnings above an annual threshold will cause your SS benefits to be reduced by $1 for every $2 you earn above this threshold. The year you reach your FRA, this earnings test and reduction amount adjust favorably (but still apply). The year after you reach your FRA, absolutely no reduction applies.


There you have it! Those are five key principles that are both wildly important and frequently misunderstood. Gaining an understanding of them should help you better plan for how to optimize this important benefit that you have been paying into for many years and likely desire to get the most out of. Social Security is almost certainly not going to be enough to get you through retirement, but it certainly plays an important role, and getting it right can have a meaningful impact on your financial plan. Of course, there are other important considerations beyond just the five we discussed here, especially if you are divorced or widowed. Please reach out to us as you try to navigate these waters!