Reaching retirement age can be an exciting time full of changes – including changes to your income stream. While you may be ready to make the move from paycheck to Social Security check, it’s important to first understand what Social Security is, and how to maximize your earnings to ensure you can live out your retirement dreams.

  • Know your full retirement age: Your age has a big impact on your Social Security benefits. While you can typically claim Social Security at age 62, it can pay off to wait until you reach your full retirement age. For those born between 1943 and 1954, the full retirement age is 66 – meaning the age at which a person may become entitled to full benefits. The full retirement age will gradually rise toward 67 for those born after 1954. If you decide to claim your benefits early, it can result in risks and permanent reductions to your income.
  • Understand spousal benefits: Both current and ex-spouses (if you were married for more than ten years and did not remarry prior to age 60), as well as widow and widowers are eligible to receive spousal benefits once they reach retirement age. Your spouse will need to file for their benefits first in order for you to be eligible; spousal benefits can be up to 50 percent of your spouse’s Social Security benefits. If you are a widow or widower and of retirement age, you may also be eligible to receive 100 percent of your spouse’s benefits. 
  • You don’t need to stop working to collect Social Security benefits: If you reach your full retirement age but aren’t quite ready to take the plunge into retirement, you can continue to work and receive your benefits. If you are younger than the full retirement age (currently 66), your monthly benefits will be temporarily reduced. Once you reach full retirement, your benefits will increase to make up for lost time. 
  • Delaying your claim can pay off: If you can afford to delay claiming your Social Security benefits, it can result in an increase in the amount you receive later on. Your benefits can stand to grow 7-8 percent a year if you delay until age 70. Cost of living adjustments (COLA) will also be included in that increase. Similarly, if you are a widow or widower, delaying your spousal claim can also increase your income. 
  • Benefits aren’t always tax exempt: Throughout your career you will have paid into the Social Security Trust Fund, but when you begin receiving benefits you will likely need to continue paying taxes on your benefits. Benefits lost their tax-free status in 1984, and, depending on your income, you may be required to pay tax on up to 85 percent of your benefits.

Navigating the Social Security landscape can be complicated. Ensure you fully understand your options and make the most of your benefits by consulting a CFP® professional.