Claiming Social Security at the wrong time is one of the most expensive mistakes a retiree can make, and most people make it without realizing it. Claiming at 62 instead of 70 can reduce your monthly benefit by up to 30 percent permanently. Over a 25-year retirement that difference can represent hundreds of thousands of dollars in lifetime income. In this guide we cover exactly when to claim, how spousal benefits work, how to use an annuity to maximize your Social Security strategy, and how a licensed local advisor can help you build retirement income planning around your specific situation.
How Social Security Benefits Are Calculated
Your Social Security retirement benefit is based on your 35 highest-earning years. The Social Security Administration calculates your Average Indexed Monthly Earnings (AIME) from those 35 years and applies a formula to produce your Primary Insurance Amount (PIA), the benefit you receive if you claim at your exact full retirement age.
Your full retirement age depends on your birth year:
- Born 1943 to 1954: full retirement age is 66.
- Born 1955 to 1959: full retirement age increases gradually from 66 and 2 months to 66 and 10 months.
- Born 1960 or later: full retirement age is 67.
You can claim as early as 62, but your benefit is permanently reduced. You can delay as late as 70, and your benefit increases every month you wait past full retirement age.
What Happens When You Claim Early vs Late
This is the decision that has the biggest financial impact for most retirees, and it is permanent.
- Claiming at 62: your benefit is reduced by approximately 25 to 30 percent compared to your full retirement age benefit. You receive more checks but each one is smaller for the rest of your life.
- Claiming at full retirement age: you receive 100 percent of your calculated benefit. This is the baseline against which early and delayed claiming are compared.
- Delaying past full retirement age: your benefit increases by approximately 8 percent per year for each year you delay past full retirement age up to age 70. At 70 you have earned the maximum possible benefit, approximately 24 to 32 percent more than your full retirement age benefit depending on your birth year.
The breakeven point, the age at which delaying produces more total lifetime income than claiming early, is typically around age 78 to 82 depending on your specific numbers. If you expect to live past that age, delaying almost always produces more total lifetime income.
How Spousal Benefits Work and Why Coordination Matters
Spousal Social Security benefits are one of the most underused income maximization strategies available to married retirees.
- Spousal benefit: a spouse who earned less, or did not work, may be eligible for a benefit equal to up to 50 percent of their partner's full retirement age benefit. This is available even if the lower-earning spouse has little or no work history of their own.
- Survivor benefits: if one spouse passes away, the surviving spouse may be eligible for 100 percent of the deceased spouse's benefit if it is higher than their own. This makes the higher-earning spouse's claiming decision especially impactful for the household's long-term income.
- Coordinating when each spouse claims: a common strategy is for the lower-earning spouse to claim at 62 to bring in some income, while the higher-earning spouse delays to 70 to maximize the benefit that will determine both the household income and the survivor benefit for the rest of both their lives.
This type of coordination strategy is exactly what a licensed local retirement income advisor can help you model for your specific situation. If you are not sure where to start, our guide on how to find a local annuity advisor walks through the process.
The Annuity Bridge Strategy: How to Fund the Wait Until 70
One of the most powerful ways to maximize Social Security is also one that most retirees have never heard of: using annuity income to cover living expenses between retirement and age 70 so you can delay claiming your Social Security benefit.
Here is how it works:
- You retire at 65 but want to delay Social Security until 70 to lock in the higher benefit. Without another income source you would need to either draw down your savings or claim Social Security early.
- Instead you purchase an annuity with a guaranteed income rider that starts paying you a predictable monthly income immediately. This annuity income covers your living expenses from 65 to 70 while your Social Security benefit continues to grow. Products worth comparing here include fixed annuities, fixed indexed annuities, and MYGAs.
- At 70 you turn on your significantly higher Social Security benefit. The annuity income and Social Security together now form a guaranteed income floor that covers your essential expenses for the rest of your life regardless of how long you live.
The math on this strategy depends on your specific numbers: your Social Security benefit, your retirement expenses, your savings, and your health. A licensed independent advisor at Superb Assets can model this for your situation specifically to show you whether the lifetime Social Security increase justifies the approach. If you want to understand the products first, read what is a MYGA annuity and what is a fixed indexed annuity.
How an Annuity Fills the Income Gap Social Security Leaves
Social Security was designed to replace approximately 40 percent of pre-retirement income for average earners. For most retirees that is not enough to cover all retirement expenses, creating an income gap that needs to come from somewhere.
The options for filling that gap are:
- Drawing from savings or investments: which carries the risk of outliving your money if the market underperforms or if you live longer than expected.
- Part-time work: which is not always physically or practically possible in later retirement years.
- Annuity income: which provides guaranteed monthly payments for life regardless of how long you live or how markets perform.
For retirees who want the security of knowing their essential expenses are covered no matter what happens to the market or how long they live, combining Social Security with an annuity income rider creates a retirement income floor that cannot be outlived. If you already own a contract, a free annuity review is a sensible starting point.
Why a Local Advisor Makes This Decision Easier
Social Security timing, spousal coordination, and annuity strategy are not decisions that should be made in isolation. They are interconnected. Your Social Security timing affects how much annuity income you need, which affects which annuity product fits, which affects which carrier and term makes sense for your situation.
A licensed independent retirement income advisor can model multiple scenarios for you, showing you the projected lifetime income from different claiming ages combined with different annuity structures, so you can make a genuinely informed decision rather than guessing. Many retirees start by looking for annuity advisors near me and comparing a few options before committing.
Superb Assets connects you with licensed independent local advisors who specialize in exactly this kind of retirement income planning, combining Social Security optimization with annuity strategy to build an income floor that lasts for life. You can also find a local annuity advisor directly, attend one of our free retirement seminars, or join one of the free retirement dinners hosted near you. Not sure what those events are like? Read free retirement dinner what to expect.
Final Thoughts
Social Security is the foundation of most retirement income plans, but claiming at the wrong time or ignoring spousal coordination can permanently reduce that foundation by tens of thousands of dollars. Pair the right Social Security strategy with the right annuity product and you create a guaranteed income floor that covers your essential expenses for life no matter what the market does or how long you live. The best first step is a free conversation with a licensed independent local advisor who can show you exactly what your numbers look like. You can schedule a free consultation any time.
Frequently Asked Questions
When should I claim Social Security to maximize my benefit?
The longer you delay, up to age 70, the higher your monthly benefit. Delaying past full retirement age increases your benefit by 8 percent per year. Whether that makes sense depends on your health, other income, and retirement plan.
How much does delaying Social Security increase my benefit?
Approximately 8 percent per year past full retirement age up to age 70, potentially 24 to 32 percent more than your full retirement age benefit depending on your birth year.
How do spousal benefits work?
A lower-earning spouse may claim up to 50 percent of their partner's full retirement age benefit. Coordinating when each spouse claims can significantly increase household lifetime income.
How does an annuity complement Social Security?
An annuity with a lifetime income rider fills the income gap Social Security leaves, creating a guaranteed income floor that covers essential expenses for life regardless of how long you live.
Can I use an annuity to bridge the gap while delaying Social Security?
Yes. Annuity income can cover living expenses between retirement and age 70, allowing you to delay claiming and lock in the higher lifetime benefit.