Social Security: Simple Rules, Big Consequences

By Jack Strulowitz

Last week, a client said something I hear all the time.

“I know it pays to wait on Social Security, so I want to do that.”

Most people understand that delaying Social Security can increase their benefit. Where things usually get murky is when that general idea has to turn into an actual decision that fits within the rest of a retirement plan. Knowing that it “pays to wait” and knowing whether waiting makes sense for you are two very different things.

Social Security is one of the most consequential financial decisions people make in retirement, yet it is often treated casually. Once benefits begin, the decision is largely permanent. That alone makes it worth slowing down and approaching it with more structure.

Below is a simple way to think about Social Security and how to approach the decision.

The basic claiming rules. Social Security can be claimed as early as age 62, which results in the lowest possible monthly benefit. Full retirement age is either 66 or 67 depending on your birth year and represents the age at which you are entitled to 100 percent of your earned Social Security benefit.

For each year you delay past full retirement age, your benefit increases by roughly 8 percent, up until age 70, which is when your monthly benefit reaches its maximum. Once you begin collecting, the age at which you claim locks in your base benefit for life, with future increases coming only from annual cost-of-living adjustments.

That increase is meaningful because it is guaranteed and adjusted for inflation. Unlike market returns, it does not depend on timing, performance, or behavior. For many retirees, delaying Social Security represents one of the most reliable ways to increase lifetime income.

What Social Security is designed to do. Social Security was never meant to replace your full working income. It is designed to provide a base level of income that lasts for life and keeps up with inflation. The higher that base is, the more flexibility you typically have elsewhere in your plan.

When Social Security is claimed early, that base is permanently lower. When it is delayed, the higher benefit becomes more valuable later in life, when expenses such as healthcare often rise and portfolio flexibility tends to decline. Thinking of Social Security as a foundational income source rather than just another check can materially change how retirement income planning is approached.

How Social Security interacts with investments. The timing of Social Security directly affects how and when you draw from your investment accounts.

Claiming early generally reduces portfolio withdrawals in the first few years of retirement but increases reliance on investments later. Delaying Social Security often requires higher withdrawals early on while reducing pressure on the portfolio in later years.

This interaction matters because the early years of retirement are particularly sensitive to market volatility. Poor market returns early, combined with heavy withdrawals, can have long-term consequences. Coordinating Social Security with portfolio withdrawals can improve the durability of a retirement plan by smoothing cash flows and reducing risk over time.

Taxes and Medicare considerations. Social Security is taxable depending on your overall income. For many retirees, up to 85 percent of benefits can be subject to federal income tax. The timing of benefits can influence which tax brackets you fall into and how efficiently different accounts are drawn down.

This also affects planning opportunities. Delaying Social Security can create years of lower taxable income, which may allow for Roth conversions or more strategic use of pre-tax assets. Claiming too early, without coordination, can eliminate those opportunities.

Medicare premiums add another layer. Medicare uses income from two years prior to determine premiums, and higher income can result in higher costs. A poorly timed Social Security decision can unintentionally increase Medicare expenses later.

Planning considerations for married couples. For married households, Social Security planning is rarely a single decision. Spousal and survivor benefits mean that one spouse’s claiming decision can directly affect the other.

In most cases, a surviving spouse receives the higher of the two benefits. That means the claiming strategy of the higher-earning spouse can determine survivor income for the rest of the surviving spouse’s life. In many situations, delaying the higher earner’s benefit improves long-term security even if both spouses expect to live long lives.

This aspect of Social Security is frequently overlooked and can have significant long-term implications.

Health, longevity, and realistic assumptions. Health is often cited as a reason to claim early, and sometimes that is appropriate. At the same time, many people underestimate how long they may live, especially in families with a history of longevity.

Social Security is uniquely valuable because it pays more the longer you live. That makes it effective insurance against the risk of outliving your assets. Evaluating the decision with realistic longevity assumptions rather than fear-based ones is critical.

Why Social Security should not be isolated. The most common mistake people make is treating Social Security as a standalone decision. Claiming age affects cash flow, taxes, investment withdrawals, Medicare premiums, and long-term stability. Evaluating it in isolation often leads to unnecessary tradeoffs.

In the client’s case, waiting made sense because he had sufficient assets to support early retirement years and valued higher guaranteed income later in life to reduce portfolio pressure over time. Social Security was positioned as a central component of the plan rather than an afterthought.

A more deliberate approach. There is no single claiming age that works for everyone. The right decision depends on assets, income needs, tax considerations, health, marital status, and long-term priorities.

What is consistent is the value of approaching Social Security deliberately. Treated properly, it becomes one of the most valuable financial assets you own. Treated casually, it can quietly limit flexibility for decades.

That is why Social Security deserves more than a quick decision. It deserves a plan. n

Jack Strulowitz is a Financial Advisor at Bernath & Rosenberg in Cedarhurst, NY, where he helps high–net worth individuals and families manage their investments and build comprehensive strategies for retirement, tax, and estate planning. For questions or to schedule a consultation, please contact [email protected] or 847-962-3352.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.