Social Security is one of the most valuable — and most misunderstood — components of a retirement income plan.
For many households, it represents a six- or even seven-figure asset when viewed as a lifetime income stream. Yet most people spend far less time planning their claiming strategy than they do managing their investment portfolio.
Here, we're covering what drives your benefit amount, how timing affects lifetime income, and how Social Security fits into a broader retirement income strategy, including tax considerations, spousal benefits, and portfolio coordination.
Social Security is a federally funded retirement income program financed through payroll taxes (FICA). Workers who have earned at least 40 credits (roughly 10 years of work) are eligible for retirement benefits.
Key features at a glance:
Your monthly Social Security benefit is calculated based on three primary factors:
The average Social Security retirement benefit in 2026 is approximately $1,976 per month. The maximum benefit at full retirement age is around $4,100/month and up to $5,108/month if you delay to age 70.
One of Social Security's most powerful features is its annual Cost of Living Adjustment (COLA). Unlike most fixed pensions or annuities, Social Security benefits automatically increase each year to help preserve purchasing power.
COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as published by the U.S. Bureau of Labor Statistics.
| Year | COLA Increase |
| 2026 | 2.8% |
| 2025 | 2.5% |
| 2024 | 3.2% |
| 2023 | 8.7% |
| 2022 | 5.9% |
| 2021 | 1.3% |
Source: Social Security Administration
A benefit of $2,000/month in 2021, after five years of compounding COLA, would be worth approximately $2,450/month by 2026. That's an inflation-driven increase of roughly $450/month with no change in your claiming strategy.
This built-in inflation protection makes Social Security especially valuable in late retirement, when healthcare costs tend to rise faster than general inflation.
Your Social Security benefit depends on your earnings history and the age at which you begin claiming benefits:
The highest benefits are typically associated with individuals who earned at or above the taxable maximum income for at least 35 years.
Even if you don’t reach the maximum, understanding your projected benefit can help you gauge how much of your retirement income may come from Social Security versus other sources.
Social Security's long-term funding is a frequently discussed policy issue.
According to the Social Security Administration's 2024 Trustees Report, the combined trust funds are projected to be able to pay full benefits through 2035. After that, incoming payroll taxes alone could fund approximately 83% of scheduled benefits without any legislative changes.
For those nearing retirement, particularly those within 10 years of claiming, the focus is generally less on whether benefits will exist and more on how to optimize them within a coordinated income strategy.
Social Security is typically the most reliable income source in retirement: guaranteed, inflation-adjusted, and lifelong. For most retirees, it serves as a foundational layer that other income sources (portfolio withdrawals, pensions, annuities) are built around.
Key planning decisions often include:
For some individuals nearing retirement, Social Security may not be needed immediately.
In these cases, delaying benefits could increase future guaranteed income, which may provide greater stability later in retirement, particularly during periods of market volatility.
At the same time, delaying benefits may require relying more heavily on other assets earlier. This can affect both tax exposure and how a portfolio is used over time, making the timing decision less about Social Security alone and more about how different income sources work together.
The difference in timing can have a meaningful impact on how income is structured over time.
The age at which you claim Social Security can affect not just your monthly income, but how and when you may need to draw from other assets.
| Claiming Age | Estimated Monthly Benefit | Key Trade-Off |
| 62 | Lower monthly benefit | Provides income sooner, but reduces lifetime monthly payments |
| 67 (FRA) | Full benefit | Balanced approach based on standard retirement age |
| 70 | Highest monthly benefit | Delays income, but increases guaranteed lifetime payments |
This example is for illustrative purposes only. Actual benefits vary based on earnings history and other factors.
Waiting until 70 produces the highest lifetime income for most people in good health with other assets to bridge the gap.
Claiming at 62 reduces your benefit permanently by roughly 30% compared to your FRA amount. Waiting from FRA to 70 increases your benefit by approximately 8% per year. The right age depends on your health, income needs, and whether you have other assets to draw from in the meantime.
For married couples, the higher earner delaying to 70 is often the most impactful strategy because that benefit also determines the survivor benefit.
If you claim before FRA and continue working, your benefits may be temporarily reduced.
In 2026, the SSA withholds $1 in benefits for every $2 you earn above $22,320/year (the annual earnings limit). Once you reach FRA, there is no earnings limit. You can work and collect your full benefit simultaneously.
Benefits withheld before FRA are not lost; they are added back in the form of a higher monthly benefit once you reach FRA.
No, benefits do not grow beyond age 70. Delayed retirement credits stop accruing at 70, so there is no financial incentive to delay claiming beyond that age.
However, continuing to work can increase your benefit if those earnings replace a lower-earning year in your 35-year calculation.
Zero-earning years are averaged into your benefit calculation, lowering your monthly payment. The SSA uses your 35 highest-earning years.
If you worked fewer than 35 years, zeros are averaged in for the missing years. Even part-time work in the years before claiming can improve your benefit if it replaces a zero-earning year.
In some cases, yes. Delaying Social Security allows your guaranteed, inflation-adjusted benefit to grow while you draw from other assets.
This approach can reduce longevity risk (the chance of outliving your money) because a higher Social Security benefit continues for life regardless of market performance. However, delaying may not make sense if you have significant health concerns or if early withdrawals from taxable accounts would create an unfavorable tax situation.
This decision is best evaluated as part of a comprehensive income plan.
Yes, within limits. If you claimed early and regret it, you have 12 months from your initial claim to withdraw your application and repay all benefits received. After that window, you can suspend your benefit at FRA, allowing delayed retirement credits to accrue until age 70, without repaying prior benefits.
Up to 85% of your Social Security benefits may be subject to federal income tax if your combined income exceeds $34,000 (individual) or $44,000 (married filing jointly).
Strategic income planning, including Roth conversions before claiming, managing portfolio withdrawals, and using qualified charitable distributions, can reduce the taxable portion of benefits and lower your overall effective tax rate in retirement.
If you’d like to discuss general considerations around Social Security timing as part of your overall financial picture, schedule a free discovery call with one of our financial planners today.
This material is provided for general informational and educational purposes only and is not intended as individualized investment, legal, or tax advice. Social Security claiming decisions are highly personal and depend on individual circumstances.
CRN202904-11054295
Jordan Bilodeau, CFP®, is a Partner and the Director of Planning & Strategy at Spaugh Dameron Tenny, where he leads firmwide planning initiatives and helps clients navigate complex financial decisions. With experience in portfolio design, tax strategies, and business succession planning, Jordan works with executives, physicians, dentists, and successful retirees to coordinate every aspect of their financial lives. He holds the CERTIFIED FINANCIAL PLANNER® designation and has a Master’s degree in Wealth and Trust Management, providing tailored guidance for clients.
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