10 Things You Need to Know About Social Security
1. Your Benefit Is Based on Your 35 Highest Earning Years
Social Security calculates your benefit using your 35 highest-earning years of work. If you have fewer than 35 years of earnings, zeros are factored into the calculation, which can meaningfully reduce your monthly benefit. Gaps in work history matter and understanding this early gives you time to address it.
2. Full Retirement Age Is Probably Later Than You Think
For anyone born in 1960 or later, full retirement age (FRA) is 67. Claiming before that age results in a permanent reduction to your monthly benefit. Claiming after it increases your benefit by up to 8 percent per year until age 70. This is one of the most consequential decisions in retirement planning, and it's often made without enough information.
3. Delaying Benefits Can Pay Off Significantly
Each year you delay claiming beyond your FRA, your benefit grows by approximately 8 percent. For someone in good health with other income sources to bridge the gap, waiting until 70 can translate to substantially more monthly income over the course of retirement. It's not the right move for everyone, but it's worth modeling carefully before deciding.
4. Cost-of-Living Adjustments Help, but Don't Fully Keep Up
Social Security benefits receive annual Cost-of-Living Adjustments tied to inflation. These COLAs help preserve purchasing power, but they've historically lagged behind the actual increases in expenses retirees face particularly being healthcare costs. Relying solely on COLA to protect your standard of living is risky without a broader plan.
5. Up to 85% of Your Benefits Could Be Taxed
If your combined retirement income exceeds certain thresholds, a portion of your Social Security benefits becomes taxable. For individuals, this starts at $25,000 in combined income and can reach up to 85 percent taxable above $34,000. Strategic withdrawal planning from other accounts can help manage this.
6. Spousal and Survivor Benefits Are Often Overlooked
A spouse can claim Social Security benefits based on their own earnings record or up to 50 percent of their spouse's benefit, whichever is higher. Survivor benefits allow a widow or widower to receive the deceased spouse's benefit if it exceeds their own. Coordinating claiming strategies between spouses can make a meaningful difference in lifetime income.
7. Working Before FRA Can Temporarily Reduce Your Benefit
If you claim Social Security before your full retirement age and continue working, your benefits may be temporarily reduced if your earnings exceed the annual threshold. Once you reach FRA, this earnings test no longer applies. This is worth understanding if you're planning a gradual transition into retirement rather than a hard stop.
8. Social Security Is Designed for Life — Which Is Both Good and Complicated
Because Social Security is a lifetime income stream, it becomes more valuable the longer you live. At the same time, longevity means your retirement savings need to stretch further. Social Security should be treated as a foundation, with other assets built on top of it to ensure you're covered regardless of how long retirement lasts.
9. Inflation Erodes What Social Security Doesn't Fully Replace
Even with annual adjustments, Social Security alone may not keep pace with your actual cost of living over a 20 or 30 year retirement. Healthcare inflation in particular tends to outrun standard COLA figures. A diversified portfolio that includes assets capable of outpacing inflation remains essential alongside Social Security income.
10. Social Security Is One Piece — Not the Whole Plan
Social Security provides a meaningful income foundation, but it was never meant to carry the full weight of retirement. Without a comprehensive plan that coordinates Social Security with your other income sources, tax strategy, and investment accounts, you're leaving money on the table and exposing yourself to unnecessary risk.
Building a Plan Around Social Security
At KLD Wealth Management, retirement planning goes beyond simply deciding when to file. It means developing a coordinated strategy that looks at Social Security alongside your investment accounts, tax situation, income needs, and optimizing each piece in relation to the others.
• Customized claiming strategies based on your health, income, and goals
• Tax-efficient withdrawal sequencing to minimize what the IRS takes from your benefits
• Inflation-aware planning that protects purchasing power throughout retirement
The decisions you make around Social Security can affect your retirement income for decades. They deserve careful thought — not a last-minute calculation.
A clear plan now can save you a lot of stress later.