How Social Security Fits into Your 2024 Financial Framework, According to Experts
Written by
Jacob Wade
Edited by
Ashleigh Ray
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Planning for retirement is important, but many overlook the power of Social Security benefits.
While it’s always a good idea to work with a financial planner to help put together a plan for your 401k, IRA, and other investment accounts, don’t forget to review your Social Security benefits as part of your plan.
We chatted with a few financial planning experts to get the scoop on how Social Security fits into a financial plan for 2024. Here’s how to review and plan for retirement in light of current Social Security laws.
Factor Social Security Benefits Into Your Plan
Before you set your retirement date, make sure to review the impact of your Social Security Benefits on your retirement plan.
J.P. Geisbauer, a Certified Financial Planner (CFP) and Certified Public Accountant (CPA) at CenterPoint Financial Planning, said, “Create an account at ssa.gov, and review Your Social Security Statement. This statement is a wealth of information. Most importantly, it shows your work history and the projected social security benefit based on the age you claim.
He continued, “There are calculators and other tools on the SSA website. But having your most recent statement is an excellent start in understanding how social security will fit into your overall plan.”
“One of the things I see retirees struggle with is when to file for their Social Security Benefits,” said Eric Mangold, wealth manager and founder of Argosy Wealth Management.
With so many rules governing Social Security, it can be hard to know when or even how to file. The wrong filing strategy could leave money on the table that should be in your pocket.
“Do you know how much your Primary Insurance Amount or PIA is at age 62, Full Retirement Age FRA and age 70? Are you married? Are you planning to work before you reach your Full Retirement Age?” asked Mangold. “You should understand the different filing options, when to file and if you are able to wait to collect your benefits, how much more money will come in the door each month.”
As a CFP with over a decade of experience guiding clients towards secure retirements and the CEO of Prosperitage Wealth, Brian K. Seymour, II, has seen firsthand the transformative power of strategic Social Security claiming decisions.
“It’s a nuanced conversation, often rife with emotional and financial complexities,” said Seymour II. “But one thing I can confidently say is this: when it comes to claiming Social Security, patience is often the most potent financial tool at your disposal.”
Delaying Social Security Can Earn You More
One of the best ways to maximize Social Security is through delaying your benefits, a strategy that CFP and founder of 9i Capital Group, Kevin Thompson, proposes to many of his clients.
“The importance of delaying Social Security cannot be understated, however, there are a lot of things to consider before we make that judgment,” said Thompson. “Furthermore, building a Social Security maximization strategy is imperative. By using assets and qualified accounts, we can delay taking Social Security until needed.”
“Think of it as the ultimate compound interest on your retirement savings,” added Seymour II. “For every year you delay claiming your Social Security benefits beyond your Full Retirement Age (FRA), you earn an 8% increase in your monthly payout, up to age 70. That’s not a typo. It’s a government-backed inflation-adjusted raise, year after year.”
Seymour II gave this example:
- Scenario 1: Claim at FRA (66 for most in 2024) and receive a monthly benefit of $2,000.
- Scenario 2: Delay claiming to age 70 and receive a monthly benefit of $2,768, a 38% increase over Scenario 1.
As you can see, that’s a significant jump, and the money compounds over time. Over a 20-year retirement, delaying benefits by just four years could translate to hundreds of thousands of dollars in additional income.
Seymour II said, “It’s a game-changer, especially for those with longer life expectancies or modest retirement nest eggs.”
Should You Claim Social Security Early?
Not everyone should wait on Social Security, and there are legitimate reasons to claim your benefits early. Thompson says to consider your health.
“If you’ve had [health issues] in the past, it may be conducive to take Social Security earlier to maximize the payments,” he suggested.
“There are valid reasons for claiming early, such as immediate financial needs or health concerns,” said Seymour II. “…social security is eligible to be claimed as early as aged 62, albeit with significant drawbacks. [If you] claim at 62 and receive a monthly benefit of $1,400, [that would be] a 30% decrease from Scenario 1 and almost half of Scenario 2.”
Also, if you decide to claim benefits before your FRA, you’ll be subject to an earnings text. If your earnings exceed a certain limit, your benefits will be reduced or even withheld. In 2024, the limit is $19,560 per year. For every $2 of earnings above this limit, $1 of your Social Security benefits will be withheld.
Once you reach your FRA it increases to $73,340 per year. For every $3 of earnings above this limit, $1 of your benefits will be withheld.
Don’t Forget About Spousal Benefits
Social Security also comes with spousal benefits, which can have a significant impact on your retirement plan.
“Married individuals should also remember to consider the impact of spousal benefits,” said Seymour II. “Delaying your claiming can also increase the future benefits your spouse or dependents may be eligible for.
Based on your earning record, eligible spouses can receive up to 50% of your primary benefit amount, even if they haven’t worked enough to qualify for their own benefits.
“This can be particularly beneficial for spouses who stayed home to raise children or had lower earnings. It’s a win-win scenario for long-term financial security,” continued Seymour II.
But delaying can also cause issues for your spouse, especially in the event of an untimely death.
As Thompson explained, “Delaying Social Security may allow for a higher spousal benefit in the future, however, nothing will offset the fact that the spouse loses roughly 1/2 portion of the Social Security benefit on the death of the spouse.”
The Takeaway
Whether you believe Social Security matters or not, it’s important to have a plan in place for it.
“Remember, Social Security is a cornerstone of your retirement income,” said Seymour II. “Don’t underestimate its power, and don’t settle for claiming prematurely.
“Most clients fail to treat their social security claiming strategy as the six-figure decision that it is and would never treat their 401ks with such carelessness. By carefully considering your claiming options and embracing the power of delayed claiming, you can unlock a future filled with financial freedom and peace of mind.”
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