The years leading up to retirement can feel like a whirlwind of emotions. You might be eager for the next chapter, anxious about your financial future, and uncertain about the complexities of Social Security. It’s even more challenging when it seems like everyone else has it all figured out.
With the shifts in the workforce following the Great Resignation (1) of 2021 and 2022, more people are reevaluating their retirement plans. Now, more than ever, understanding and optimizing your Social Security benefits is a critical piece of your financial strategy.
Our goal with this guide is to provide you with clarity and confidence, helping you navigate the Social Security process so you can step into retirement feeling clear and well-prepared.
How Are Social Security Benefits Calculated?
Your Social Security benefits are calculated by the Social Security Administration (SSA). Benefits are based on lifetime earnings across your 35 highest earning years. You must work a minimum of 10 years to be eligible for benefits. If you have worked less than 35 years, your earnings will be calculated with zeros for the years you have not worked. All past wages are indexed to today’s wages in order to accurately reflect wage growth.
Once your average monthly earnings for your top 35 years are calculated, a special formula is applied and the result is your primary insurance amount (PIA). The PIA is the benefit you are eligible to receive when you reach full retirement age (FRA).
The actual benefit you receive may not be your PIA. This is because your PIA will be increased or decreased depending on when you choose to receive benefits. Taking benefits before FRA will reduce your benefit, and waiting until after FRA will increase your monthly benefit. Also, starting at age 62, your eligible benefits will receive regular cost-of-living adjustments (COLA). (2)
Spousal Benefits
Married people are eligible for benefits based on their spouse’s work history. The spousal benefit is 50% of the working spouse’s earned benefit. In order to receive these benefits, the working spouse must be at least 62 and have already filed for benefits.
If you are divorced, you may also be eligible to receive spousal benefits based on your ex-spouse’s work history. Your marriage needs to have lasted at least 10 years, you must be divorced for at least two years, and you must still be single. In addition, you need to be at least 62 and not eligible for a higher benefit amount based on your own work record. Unlike spousal benefits for married people, your ex-spouse does not need to have filed for benefits in order for you to claim them.
When Can You Claim Social Security Benefits?
You can claim your Social Security benefits anytime between age 62 and age 70. If you continue to delay taking benefits after you reach age 70, there is no additional benefit increase. However, the age at which you choose to collect benefits before 70 will impact the amount of benefit you receive.
Early Retirement
You can start receiving benefits as early as 62, but your monthly benefit will be lower than if you waited longer. Your basic benefit is reduced a fraction of a percent for each month you begin receiving benefits prior to full retirement age. Retiring early can permanently reduce your benefit by up to 30%.
Full Retirement Age
Your full retirement age (FRA) changes based on the year you were born. (3) FRA is 66 for those born between 1943 and 1954 and increases by two months for every year after that you were born until it settles at age 67 for those born in 1960 or later. If you wait until you reach full retirement age to begin collecting your Social Security benefits, you will receive the full PIA that you have earned.
| Year Born | Full Retirement Age (FRA) |
| 1943 to 1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
Delayed Benefits
If you’re still working or don’t need the money immediately, you can delay receiving your benefits. Your benefit will increase by 8% for each year that you delay, with a maximum possible increase of 32%. You cannot delay and increase your benefit indefinitely, though. Once you reach age 70, the amount of benefits you receive will not increase any further.
When Is the Best Time to Claim Social Security Benefits?
While you are working, you can increase your future Social Security benefits by earning higher wages. Once you stop working, though, the only influence you have over your benefit is when you begin to take it. Your timing has a great impact on the amount of the benefit you will receive and should be carefully considered.
Social Security Statement
An important document that you will reference during the decision-making process is your Social Security statement. The Social Security Administration mails statements to workers age 60 and over who aren’t receiving Social Security benefits and do not yet have a my Social Security account. These statements will be mailed out three months prior to your birthday, but you can also access the same information by setting up an account on their website.
The statement will tell you your:
- Estimated benefit if taken at age 62
- Estimated benefit if taken at FRA
- Estimated benefit if taken at age 70
- Estimated disability benefit
- Estimated family and survivor benefits
- Medicare information
- Earnings history
All benefit amounts listed are estimates and subject to change. They are calculated based on your date of birth and future estimated taxable earnings.
It is important to review your earnings history and check for accuracy. Your benefit is calculated based on those numbers, so any mistakes can affect your benefits. You should correct any errors as soon as possible.
Deciding When to Claim Benefits
Your Social Security benefits are calculated using complex actuarial equations based on life expectancy and estimated rates of return. They are not designed to encourage early or late retirement. If you live as long as anticipated, the total amount you receive over your lifetime should be about the same whether you claim it at age 62, age 70, or sometime in between. You will either receive the money as a smaller monthly payment over a longer period of time or a larger monthly payment over a shorter period of time.
The best time for you to claim your benefits depends on your personal situation and health. If you expect to live longer than average, your overall lifetime benefit will be greater if you delay claiming your benefits to increase your benefit amount. If the opposite is true and you see little chance of making it into your mid-80s, you would likely receive a greater lifetime benefit by taking it sooner, even though it would be a smaller monthly payment.
When to Start Benefits: The Longer You Wait, the Larger the Benefit
Once you decide when you want to start receiving benefits, remember to complete your application three months before the month in which you want your retirement benefits to begin.
How Can Married Couples Maximize Benefits?
Because married people have the ability to receive their own benefit or a spousal benefit, they have more to consider when filing for benefits. With the right strategy, married couples can maximize their benefits.
In the majority of cases, the lower-earning spouse may want to begin collecting benefits early while the higher-earning spouse waits as long as possible. That way, you can access the lesser benefit while maximizing the higher benefit.
Often, it is the husband with the higher benefit and the wife with the lower one. Women also tend to live longer than men. By following this strategy of waiting as long as possible to claim the higher benefit, you not only maximize the husband’s retirement benefit for use while he is alive, but it also maximizes the wife’s survivor benefit when he passes away.
Restricted Application
While it used to be a popular claiming strategy, the Restricted Application is now only available to those born before January 2, 1954. By restricting your application, you can receive a spousal benefit if your spouse is already collecting benefits while allowing your own benefit to continue to grow until age 70. That way, you can begin to receive spousal benefits while maximizing your own benefit.
How Does Working Affect Benefits?
Working does not affect your benefits once you reach FRA, but it does before that. Only earned income, such as wages and self-employment earnings, affects your Social Security benefits. Income from investments, pensions, and annuities do not affect Social Security benefits.
When you are under FRA (4) for the whole year, your Social Security benefit is reduced by $1 for every $2 you earn over $21,240. In the year that you reach FRA, your benefit is reduced by $1 for every $3 you earn over $56,520. Once you reach FRA, your benefit is no longer reduced no matter how much you earn. These dollar amounts adjust each year, so your benefit may change in following years.
2025 Cost-of-Living Adjustment
The 2025 COLA is 2.5%, (5) slightly lower than 2024’s increase of 3.2%. There is also an increase in the Social Security tax cap. (6) The cap is increased from $160,200 to $168,600, meaning Social Security taxes will not be withheld from income earned above that amount.
This substantial increase in benefits will hopefully provide retirees some relief from the rising cost of goods and services. Historically, a COLA that fails to keep pace with inflation only serves to exacerbate financial hardships. It’s important to keep in mind that the COLA will affect pre-retirees and retirees differently. Here’s what to expect based on where you are in your retirement journey.
Retirees Taking Social Security
While this increase is good news for retirees, it’s not a license to change spending habits all that much—as most retirees know all too well.
It will still be necessary to keep track of your finances, spending—and, importantly, your tax liabilities; some beneficiaries could experience increased taxes in the coming years, depending on their thresholds.
Retirees Not Taking Social Security
Retirees who have not started claiming Social Security will still reap the benefits of this increase even if they don’t take Social Security this year. There is never a decrease in the COLA, so the higher payments are here to stay. Additionally, the recent elimination of the Social Security government offset and windfall provisions is also a significant change, which may further impact your benefits. Keep in mind that, in some cases, it’s worth holding off on taking Social Security for several years once you’re eligible, as discussed above. Of course, the benefits of doing so vary based on individual circumstances.
Partner With a Knowledgeable Advisor
Your decision on when and how to claim Social Security can be one of the most critical choices for your retirement—especially depending on the amount you’ve saved. Given its complexity and impact on your long-term financial health, it’s wise to work with a financial professional before moving forward.
At Elevate Wealth Management, we’re here to guide you through the Social Security process so you feel confident and ready for the future. If you’re approaching retirement and have questions about how Social Security fits into your broader financial plan, we’re here to help.
Schedule an introductory meeting by reaching out to us at rob@elevateasset.com or 307.461.5550.
About Rob
Rob Johnson is a financial advisor at Elevate Wealth Management, an independent, fee-only wealth management firm serving young professionals, pre-retirees, and retirees in Sheridan, Wyoming, and surrounding areas.
With a passion for helping others achieve their goals, Rob is committed to working closely with clients to empower them to make the best financial decisions for their lives. Rob understands that every person faces unique circumstances when it comes to their financial future, so he will tailor his approach and recommendations to ensure clients feel confident about the direction they’re headed. Rob has an enthusiasm for customer service, which is apparent during every client interaction he has. Honesty and integrity are at the center of the advice and recommendations he gives, and he will work hard to build and maintain trust in every relationship.
Rob has a bachelor’s degree in economics and finance from Black Hills State University and is actively working toward his CERTIFIED FINANCIAL PLANNER®, CFP® designation. He is a Wyoming native who grew up at the foot of the Big Horn Mountains in beautiful Dayton, Wyoming. He believes strongly in giving back to the community that helped raise him by volunteering his time and serving as an active board member with various non-profit organizations in the area.
Rob and his wife Emma have two sons, Michael and Sammy, who are the lights of their lives. Rob has a passion for sports and is an avid golfer. During the warmer months of the year, there’s a good chance you’ll find him on the first tee. To learn more about Rob, connect with him on LinkedIn.
The views expressed represent the opinion of Frontier Asset Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Frontier Asset Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. The use of such sources does not constitute an endorsement. Frontier does not have an affiliation with any author, company or security noted within. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and the Frontier Asset Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. Past performance is not indicative of future results.
Frontier does not provide tax advice. Please consult with a CPA for recommendations pertaining to individual circumstances.
Elevate Wealth Management is the financial planning division of Frontier Asset Management. Frontier Asset Management is a Registered Investment Adviser with the Securities and Exchange Commission. The firm’s ADV Brochure and Form CRS are available at no charge by request at info@frontierasset.com or 307.673.5675 and are available on our website www.frontierasset.com. They include important disclosures and should be read carefully.
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(1) United States Census Bureau, “How the COVID-19 Pandemic Prompted More People to Change Jobs,” May 13, 2024
(2) Social Security, Cost-of-Living Adjustment (COLA) Information for 2025, 2025
(3) Social Security, “Starting Your Retirement Benefits Early,” 2025
(4) Social Security, “Cost-of-Living Adjustment (COLA) Information,” 2025
(5) AP News,“Social Security Recipients will get a 2.5% cost-of-living boost in 2025, smaller than in recent past,” October 10, 2024
(6) Social Security, “Maximum Taxable Earnings,” 2025