How Social Security Works
Social Security is a federal program that provides retirement income based on your lifetime earnings. You earn credits by working and paying Social Security taxes (6.2% of your wages, matched by your employer). You need 40 credits (about 10 years of work) to qualify for retirement benefits.
Your benefit amount is based on your highest 35 years of earnings, adjusted for inflation. The average monthly benefit is about $1,900, but it ranges from $800 to over $4,500 depending on your earnings history and when you claim.
When to Claim — The Most Important Decision
- Age 62 (earliest) — You can start at 62, but benefits are permanently reduced by 25-30%. If your full benefit is $2,000/month, you would get about $1,400/month at 62. This reduction is permanent — it never goes back up
- Full Retirement Age (66-67) — You receive 100% of your calculated benefit. FRA is 67 for anyone born in 1960 or later
- Age 70 (maximum) — Benefits increase 8% per year for each year you delay past FRA. If your FRA benefit is $2,000, waiting until 70 gives you $2,480/month — a 24% permanent increase. No benefit to waiting past 70
Claiming Strategies
- Claim early (62) if — You are in poor health, you need the money to survive, you have no other income sources, or you have reason to believe you will not live past 78-80
- Wait until 70 if — You are healthy and expect to live past 80, you have other income to bridge the gap, you want the highest guaranteed income for life, or you want to maximize survivor benefits for your spouse
- Breakeven analysis — If FRA benefit is $2,000: claiming at 62 gives $1,400/month. Waiting to 70 gives $2,480/month. The breakeven age is about 80-82. If you live past 82, waiting was the better financial decision
- Spousal strategy — The lower-earning spouse can claim their own benefit at 62 while the higher earner delays to 70, maximizing the survivor benefit (the surviving spouse gets the higher of the two benefits)