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Unraveling The Mystery That is Social Security Planning

Aug 22, 2022

 I am a big fan of numbers. I love numbers. Numbers, don’t lie…but as the saying goes, “Figures don’t lie, but liars figure.”

I love that saying. It is so true.

I don’t trust charts, either. Charts can be manipulated.

So, I have trust issues…so what?

So, in that spirit of “no trust,” let’s “peel back the onion” on one of life’s greatest misconceptions.

Let me ask you, “What’s your biggest retirement asset?”

You might be tempted to say your IRA, or your 401k…if you’re romantic, you might say your wife or family (P.S. That’s always my answer: yes, my wife is my best asset 😊).

What if I told you that, for most people, their Social Security benefits could easily be worth several times their retirement savings?

That’s the case for many individuals and couples who are on the verge of retirement.

Consider that Social Security is, for all intents and purposes, the world’s greatest annuity. It adjusts up with inflation at no cost to the recipient (of course, you have paid into the system for your entire working life, so it is not a handout!).

Most people who have worked diligently through the decades and received promotions along with pay raises are due a decent-sized monthly Social Security check…for the rest of their life and their spouse’s life…that’s some serious cash we are talking about.

But did you know that according to Jason Fichtner, the former Chief Economist for the Social Security Administration, only 4% of beneficiaries claim their full benefits[1]?

In fact, according to Jason’s report, the average household loses $110,000 in unclaimed benefits.

That’s some serious wampum!

And we aren’t just talking about delaying until age 70!

The Administration will pay up to 175% of your benefits to family members. It takes careful planning and strategy to make the most of your cumulative benefit.

In this series of blogs, we want to underscore the basics of Social Security so that you have confidence in your retirement strategy. We are talking about potentially a $1.5 million-plus asset. You cannot go about it haphazardly.

Let’s kick things off with a term that is defined as, but might possibly change depending on your age: “Full Retirement Age” (FRA). Your FRA probably gets more attention than it deserves. Many people see it as the special age at which they can retire. In reality, you can retire whenever you’d like and begin taking benefits at any age from age 62 to 70. The longer you wait, the greater your benefit. Your FRA is 66 if you were born between 1943 and 1954, and it increases toward 67 if you were born from 1955 to 1959. For those born in 1960 or later, your FRA is 67. You can quickly determine your FRA with a simple Google search or by visiting the Social Security Administration's website, or by looking at your statement.

You might be curious about how your benefits are earned. The formula can seem complex, but it boils down to earning 40 quarterly credits throughout your career. By earning four credits per year, it often takes 10 years of work to qualify for benefits. For 2022, a single credit requires income of $1,510 while earning four credits is simply 4x that amount: $6,040.[2] Assuming you have earned 40 credits, then your benefits are based on your 35 highest-earning years. [3]If you have fewer than 35 years of earnings, then each year with no earnings is simply considered $0 in the formula. Some retirees who do not have 35 years of wages choose to work part-time in retirement to beef up their benefits.

With all that in mind, the most someone can receive each month is $2,364 if filed at age 62, $3,345 if you file at your FRA, and $4,194 if you delay to 70.[4] For context, the average monthly benefit for 2022 was $1,657, according to AARP. To be eligible for the biggest monthly check, you must have worked many years earning around or above the maximum Social Security taxable income figure, which was $147,000 for 2022 (that amount is increased each year for inflation. Back in 1990, it was only $51,300).

We’ll continue with Social Security basics next time. These are critical issues to grasp for those nearing retirement. Knowing when to claim benefits, and how to claim them, so that you (and your spouse) maximize your income while keeping taxes in check, is paramount.

Check out our “5-Minute Social Security Maximization Guide” for a step-by-step guide on getting the most from your benefits.

CLICK HERE to download the guide.

You can also check out our hands-on Social Security workshop here:




[2] In 2022, you earn one Social Security or Medicare credit for every $1,510 in covered earnings each year. You must earn $6,040 to get the maximum four credits for the year.

[3] Calculate your average indexed monthly earnings during the 35 years in which you earned the most.

[4] The maximum possible Social Security benefit in 2022 is $4,194 per month, or $50,328 for the year.

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