I’m a Financial Advisor: If You Think It’s Time To Collect Social Security, Ask These 11 Questions First

United States capitol in Washington DC with a Social Security card and money.
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Perhaps you’ve been working for decades and are planning to retire soon. You spend a lot of time dreaming about your ideal day when you no longer have to commute to the office.

Hopefully, you’re putting just as much energy into crafting your retirement financial strategy. Collecting Social Security is a major piece of that puzzle.

Your Social Security benefits can interact with other aspects of your financial life — including taxes. So, it’s wise to learn as much as possible about how they work in advance.

We got input from five financial advisors, and they said you should ask these 11 questions before applying for Social Security benefits.

Are My Spouse and I Eligible To Receive Social Security Benefits?

“Social Security retirement benefits are determined based on various factors,” said Kevin Estes, financial planner and founder of Scaled Finance. “To verify your eligibility, please visit ssa.gov/myaccount and log in.”

Do I Have an Immediate Need for the Money?

If you don’t need the money right now, you can be more strategic about when you start receiving your benefits.

“Opting to start benefits at age 62 can reduce your monthly payment by up to 30%,” Estes said. “On the other hand, each year you delay benefits beyond full retirement age (currently age 66 to 67) increases your monthly benefit by 8%. This increase is in addition to the annual cost-of-living adjustment for inflation. Waiting until age 70 would be like receiving a raise of 24% or more for the rest of your life compared with starting at age 67.”

Are You Retirement Ready?

Question: Do you know your full retirement age (FRA)? “Knowing your FRA is critical,” said Zack Swad, CFP, president and wealth manager at Swad Wealth Management.

Do I Have Other Financial Resources To Use While I Wait To Apply for Social Security?

“How easily can you fund your retirement expenses without Social Security?” asked Jonathan Bird, CFP at Farnam Financial. “If you can fund your retirement expenses with portfolio withdrawals of less than 4% without taking Social Security, it could make sense to defer on Social Security and earn delayed retirement credits.”

How Will My Other Retirement Income Sources Affect My Social Security Benefits?

“If you have other sources of retirement income, like a 401(k) or a pension, they could potentially impact your Social Security benefits,” Swad said. “For example, if your combined income exceeds a certain threshold, up to 85% of your Social Security benefits may be taxable. Being aware of this can help you strategize and potentially minimize tax implications.” 

How Will My Work History Impact My Benefits?

“Social Security retirement benefits are calculated based on your highest indexed earnings over 35 years,” Estes said. “These earnings are adjusted for inflation using the average wages of past years. If you did not have Social Security wages for at least 35 years, those years count as $0 income and lower the monthly benefit.  

“Any income in future years would raise the benefit. Fortunately, the Social Security Administration checks annually to determine whether recent income will improve your monthly benefit. That’s the case even if you’ve already begun receiving benefits.”    

What Happens If I Work While Collecting Social Security?

“This question is crucial for those considering part-time or full-time work during their retirement years,” Swad said. “Working while collecting Social Security can affect your benefits, especially if you haven’t reached your FRA. If you earn more than a certain amount, your Social Security benefits may be temporarily reduced. However, once you reach your FRA, there’s no limit on how much you can earn without reducing your benefits.”

Are You Retirement Ready?

How Will My Social Security Benefits Affect My Spouse?

“If you’re married,” Estes said, “you may be eligible to receive up to half of your spouse’s monthly Social Security benefit during their lifetime. The Social Security Administration (SSA) calculates the higher amount between your own benefit and half of your spouse’s. To ensure you receive the maximum monthly benefit, contact your local SSA office.”

Kevin M. Arquette, CFP at WealthPoint Planning, said, “If you are the higher earner, it may be beneficial to delay receiving your benefits while you are still alive. By doing so, you can provide higher survivor protection for your spouse if you happen to pass away first.”  

What Is the Expected Monthly Social Security Benefit for My Spouse and Me?

“If your current lifestyle requires the financial support of Social Security benefits, it may pay to take a strategic approach,” Estes said. “Let’s say you’re married, and both you/your spouse are age 62. It may make sense to start Social Security benefits for the spouse with the lower benefit and delay that of the other spouse.  

“Avoiding the 30% reduction for starting early and perhaps even receiving the 24%+ lift for delaying until age 70 would apply to the larger monthly payment. Doing so might optimize total household benefits while providing income now.”

Was I Married for at Least 10 Years Before Getting Divorced?

“If you were married at least 10 years before divorce, you may be entitled to half your ex-spouse’s monthly benefit during their lifetime, even if they remarried,” Estes said. “In the event of their passing, the amount can increase to their full benefit. You must be unmarried and at least 62 years old to receive Social Security benefits based on an ex-spouse.”

What Is My/My Spouse’s Life Expectancy?

“The big question remains: ‘Will I live long enough so that delaying benefits makes up for all those years where I didn’t take a check at all?'” said Forrest Baumhover, CFP and owner of Teach Me! Personal Finance. “Thanks to longevity improvements, the answer for most people in today’s world is yes.

Are You Retirement Ready?

“When comparing two scenarios, there is a break-even point at which the lifetime value of delayed Social Security benefits surpasses that of early benefits. For example, if you were to compare taking benefits at age 70 vs. 62, the break-even point is around age 79. So anyone who expects to live to their eighties would expect to receive more in lifetime value if they delay to age 70.”

Estes said, “Do you or your spouse have any health concerns or life-threatening health issues? In certain cases, physicians can provide estimates of life expectancy based on medical records. If you feel comfortable doing so, it may make sense to consult your healthcare provider.”  

What Are My Long-Term Plans and Goals?

“Your plans may impact when you start collecting Social Security benefits,” Estes said. “Delaying the benefits can result in higher monthly payouts, which can go a long way toward funding long-term care expenses. These higher benefits could also help you preserve assets for specific bequests or other financial objectives.

“On the other hand, if leaving an inheritance to heirs is not a priority for you and you’re comfortable with [the financial implications], you may choose to start collecting Social Security benefits early.”

Final Thought

“In general, people who can afford to wait should be asking themselves why they would like to take Social Security early,” Baumhover said. “People who cannot afford to wait, by definition, might not have an option.”

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