By: Franco DiLiberto

The Social Security Act was signed into law by President Roosevelt on August 14, 1935, as a social insurance net to protect the elderly from old age, poverty and unemployment.  Today, more than 93% of American workers pay into and are covered by Social Security, and the total benefits paid out in 2017 are projected to be nearly $1 trillion dollars.  Social security remains a critical safety net for low income Americans, as well as an additional income source for middle-income and wealthy retirees.  But applying and selecting benefits can be confusing to many and the viability of the system itself is a source of much discussion as things are very different today than they were back in 1935.

Setting Up An Online Account

If you have not done so already, it is important to set up an online account at .  The Social Security Administration (SSA) now only mails paper statements annually to individuals 60 or older who have not filed for benefits.  As a result, the only way to access and review your projected benefit statement is to set up this account.  We recommend reviewing your statement online periodically to ensure your earnings are accurate.  If you notice an error, you must provide documentation to the SSA in order for them to make the correction.  Setting up your account is also an important action because it prevents someone else from fraudulently using your identity and attempting to steal your benefits.  While this may be rare, identity theft remains a real threat.

How To Apply For Benefits

It is recommended you apply for benefits three months before you want payments to start.   You can apply on online at or by calling 1-800-772-1213 to make an appointment with your local Social Security Office.  Do not expect anyone at the social security office to offer any advice on when to apply for Social Security benefits.  They are trained to provide general information and take orders, not offer advice.  When applying for benefits, you will need a birth certificate, W-2 and/or self-employment income forms from the prior year, proof of U.S. citizenship, and your bank account number and routing number to establish direct deposit.  Also, bring your spouse’s and child’s information if they are eligible.

When To Apply For Benefits

So, let’s address everyone’s favorite question, “When should I apply for benefits?”  Three important factors when making this decision are health, employment, and finances.  In general, if you are healthy, still working, and financially sound, then it is beneficial to wait until full retirement age (FRA) or beyond.   There is often an instinct to start to collect benefits as early as possible, which is at age 62. However, anyone still employed and collecting social security benefits before their normal retirement age will see their benefits reduced by $1 for every $2 in earned income (income from employment) over $16,920.  Additionally, benefits are reduced for every year you start early.  As the table below shows, filing at age 62 will result in a sizable reduction of your full retirement age (FRA) benefit.

Age               FRA 65                FRA 66                FRA 67

62                 80.0%                  75.0%                   70.0%
63                 86.7                      80.0                      75.0
64                 93.3                      86.7                      80.0
65               100.0                      93.3                      86.7
66                                             100.0                      93.3
67                                                                           100.0

Also, keep in mind that your spouse’s survivor benefit is based on the deceased spouse’s monthly benefit, so the survivor benefit will also be lower if you apply for early retirement benefits.

As an additional incentive, for each year that you postpone your application past your FRA (up until age 70), your monthly benefit grows by 8%.  Not only does this additional benefit help protect you if you live a long time, where else can you find a guaranteed rate of return of 8% in this low yield economic environment?

A common way to assess the decision about when to apply for benefits is to compute at what point do I “break even” if I postpone applying.  If you file for Social Security at full retirement age 66 instead of age 62, you will break even or recover the foregone 48 checks in about twelve years, or age 78.  Similarly, if you apply at age 70 instead of age 66, then you will break even at about age 82.  In other words, if you are feeling well and believe you will live well into your 80s, then you will receive more money in the long run by waiting until full retirement age or beyond, as well as protecting yourself in the event you live well past your life expectancy.

Don’t Forget About Spousal Benefits

If married (or widowed or divorced), you can claim a Social Security benefit based on your own earnings record, or you can collect a spousal benefit that will provide 50% of your spouse’s benefit, whichever is higher.  Spousal benefits can be applied for at age 62, as long as the other spouse is currently collecting Social Security benefits.  If applied for at age 62 or any other year before FRA, the spousal benefit is reduced.

Up until 2016, there were a few planning strategies around spousal benefit elections (commonly referred to as “deemed filing” and “file and suspend”) that took advantage of loopholes in the social security law to potentially enhance benefits.  However, those loopholes were closed and those strategies no longer apply, except on a limited basis for individuals born prior to 01/01/1954.

The Future Of Social Security

By 2034, the surplus in the Social Security is projected to run out.  The most recent projections estimate that after 2034, only about 75% of the current benefit obligation will be financed. While the issue continues to be kicked down the road, legislators in Congress will eventually need to address Social Security in order to sustain it for the future.  There are a variety of possible changes that can help solve the underfunded status of the system, including:

  • Extend full retirement age from age 67 to 70
  • Delay early benefit eligibility from age 62 to age 64
  • Subject more earnings to Social Security tax
  • Reduce the annual cost of living adjustment formulas
  • Means testing of benefit payments
  • Annual Earnings Test to include all income

It is important to remember that any changes will likely affect younger taxpayers, as politically it will be extremely difficult to alter benefits for those close to or already collecting their benefit.

Closing Thoughts

Social Security was originally intended not as a retirement plan, but to provide security for those who lived beyond their years.  Benefits started at 65, at a time when the average life expectancy in the country was also 65.  Today, it’s a highly complex system, incorporating retirement, death benefits, disability, and more….at a time when average life expectancies are closer to 85.  With complexity comes confusion.  There are a vast number of resources online about Social Security and we are happy to assist with questions as they arise.  As a resource for some basic facts, the following link is to the 2018 Social Security Fact Sheet.