How to Build Social Security into Your Retirement Plan

Social Security represents a key source of retirement income, and yet, it is one of the least understood parts of retirement planning. Most of the advice out there stops at break-even math. But the claiming decision is not just about which age produces the highest total payout. It is about how Social Security fits into your full retirement income plan, your tax strategy, and the risks you are actually trying to protect against.

How Social Security Benefits Are Calculated

Your Social Security benefit is based on your 35 highest-earning years, adjusted for inflation. The Social Security Administration takes those earnings, calculates your average indexed monthly earnings, and uses a formula to determine your benefit amount at full retirement age (FRA). For most people planning for retirement, FRA is around age 67.

You can begin collecting as early as age 62 or delay all the way to age 70. For each year you delay, your benefit grows by up to 8% a year. As a result, your benefit at age 70 could be approximately 75% higher than what you would receive at 62.

To put that in perspective, if your benefit at 62 would be $2,800 per month, waiting until 70 could bring that closer to $4,963 per month, which equates to nearly $60,000 a year. Over a 20-year retirement, that difference adds up to hundreds of thousands of dollars in additional lifetime income.

One common misconception worth addressing: full retirement age matters in several ways, but one area that is often misunderstood is the earnings test. In 2026, if you claim before FRA and earn more than $24,480, some of your benefits will be temporarily withheld. It is worth noting those withheld benefits are not lost. They are credited back to you once you reach FRA, though this is still not preferable in our view as you lose control of how they are received. If you are already retired and no longer earning a paycheck, you can claim before FRA without that earnings penalty.

Your SSA Estimate May Not Be as Accurate as You Think

Many people check their benefit estimate on the Social Security Administration’s website and plan around that number. What they may not realize is that the estimate assumes you will continue working at your current salary until claiming age.

If you retire in your 50s, those years of zero earnings may represent some of your 35 highest-earning years, potentially pulling your actual benefit lower than the estimate suggests. For someone earning $200,000 or more, retiring five years early could reduce the monthly benefit by several hundred dollars. Over a 25-year retirement, that is a meaningful difference.

If you would like help understanding what your actual Social Security benefit may look like based on your specific retirement timeline, this is something we analyze as part of our planning process.

If You Are Married, You Are a Team

If you are married, each spouse can make their own independent claiming decision. But those decisions affect each other in ways that many couples overlook.

When the first spouse passes away, the surviving spouse receives the higher of the two benefits and the lower one goes away. This is why the claiming decision is so important for married couples. If one spouse lives to 90 or even 100, having grown the larger Social Security benefit can be incredibly meaningful. That higher benefit becomes a guaranteed income stream for potentially decades.

This is one reason we encourage married couples to think about Social Security as a joint strategy rather than two separate decisions.

A common scenario we see is a couple of similar age where one spouse has a substantially lower benefit, perhaps because they took time away from work earlier in their career to care for children. Their FRA benefit may be $2,000 per month or less, while the spouse with more than 35 years of work history may have a monthly FRA benefit of over $4,000.

In this situation, we will often evaluate starting the lower benefit as early as age 62 if that spouse is retired, to begin receiving some income. The higher-benefit spouse may then delay to full retirement age, or even all the way to age 70, at which point that benefit may project to well over $60,000 a year.

This creates a strategy where, if either spouse has significant longevity, the larger benefit has been maximized and continues to grow with inflation, providing a substantial lifetime pension. At the same time, we have hedged by starting some benefits from the lower-earning spouse earlier. This combination can produce similar lifetime benefits to both spouses delaying, while receiving some income sooner as well.

What About Taking It Early and Investing the Money?

Something we hear often is that by taking Social Security early, the money can be invested and potentially exceed the growth of waiting. This is an important consideration, though it is more nuanced than it may seem.

First, Social Security benefits increase each year through cost-of-living adjustments (COLA). In recent years, this has been around 2.5 to 3% annually. In high-inflation years following COVID, COLA went as high as 8.7% in 2023. These increases compound over time and apply to a higher base amount if you delay. That compounding effect is easy to underestimate.

Second, and perhaps more importantly, Social Security acts as a pension. It is a guaranteed income stream that does not fluctuate with the stock market. If the market goes through a difficult stretch, your Social Security benefit stays the same. For professionals who may already have meaningful exposure to equities through stock awards, retirement accounts, and personal investments, Social Security provides a strong diversifier. The value of that guaranteed income, especially later in retirement, is difficult to replicate with a portfolio alone.

But What If I Delay and Don’t Live Long Enough?

This is one of the most common concerns we hear, and it is worth thinking through carefully. For most people, the risk they want to be fully confident they can avoid is running out of money in retirement.

If you delay your benefits and then end up not having longevity, you may not have mathematically benefited from waiting. However, that decision did not heighten your risk of running out of money. With a shorter retirement horizon, a financial shortfall was never the real threat. The downside of delaying in that scenario is simply a smaller total collected, not a crisis.

Now consider the opposite. If you or your spouse live well past expectations, perhaps into your late 90s or beyond, the risk of running out of money becomes far more real. That is precisely the scenario where the decision to delay pays off most significantly. The higher guaranteed income stream helps protect against the financial strain of an extended retirement.

In other words, delaying Social Security provides insurance against the outcome that would hurt the most. It does not increase your risk in the short-longevity scenario, but it meaningfully reduces your risk in the long-longevity one.

The Elephant in the Room

If delaying can be so valuable, it naturally raises another question: can you even count on the program being there? You have likely heard that the Social Security trust fund is running low. According to the most recent Trustees Report, the retirement trust fund is projected to be depleted by 2033. That headline understandably makes people nervous, but the full picture is more reassuring than it may seem.

One important point that the Social Security specialist in our recent webinar highlighted: there is a substantial stream of income flowing into Social Security every year from payroll taxes. That ongoing revenue covers roughly 80% of benefit payments. So even if the trust fund were fully depleted and Congress took no action, incoming taxes would still fund a significant majority of scheduled benefits. The trust fund represents the gap between what comes in and what goes out, not the entire funding source.

That context matters. While the imbalance is real and the fund does need to be addressed, we believe an across-the-board cut is unlikely. Social Security is one of the most politically sensitive programs in the country, and reducing benefits is not a popular stance for any politician to run on when seeking election. Our government has shown a willingness to fund programs like this through various means, and the political incentive to protect benefits is strong.

For anyone currently receiving Social Security or nearing retirement, we believe the more likely outcome is some combination of gradual adjustments rather than a sudden reduction in benefits. For younger workers, that path may involve gradually increasing the eligible age or adjusting the payroll tax structure over time. The fund will need to be addressed, but it is not a reason to panic. It is a reason to plan thoughtfully.

Fitting Social Security Into Tax and Retirement Income Planning

Social Security does not exist in a vacuum. When you claim, and how much you receive, has ripple effects across your entire financial picture.

Your tax situation, health insurance strategy, portfolio withdrawal plan, and the mix of pre-tax versus Roth accounts you hold can all influence the optimal claiming decision. For example, delaying Social Security might create a window to draw down pre-tax retirement accounts or execute Roth conversions in lower tax brackets during your early retirement years. Done intentionally, this can reduce your projected lifetime tax bill and potentially lower your health insurance costs in the years before Medicare.

Alternatively, starting Social Security earlier might make sense if it allows you to preserve investments during a volatile market or reduce portfolio withdrawals during a downturn. These are the kinds of trade-offs we help clients work through, and the right answer often depends on the specific mix of income sources, tax character, and timing in your plan.

How We Approach This Decision

So how should you actually decide when to claim? Our approach starts with the data and then layers in what matters most to you personally.

We begin by running a detailed analysis using our Social Security analyzer tool. This helps us identify the break-even ages, which is the point at which delaying benefits pays off compared to claiming earlier. For reference, claiming at 67 versus 62 typically breaks even around age 78 to 79. Delaying from 67 to 70 tends to break even around age 82 to 83.

From there, we overlay the data with your personal situation. If you are dealing with health challenges, it may be very reasonable to begin benefits earlier. If your family has a history of strong longevity, waiting could pay off significantly.

Our philosophy is to start with the data and then go with your gut for any ties. Sometimes the analysis will point to an overwhelmingly strong direction. For example, there are situations with widows or widowers where the strategy to maximize benefits is very clear. But more commonly, the data narrows the range and then it comes down to applying it to your own personal circumstances and what feels right for your situation.

This is one of the most impactful financial decisions you will make in retirement. It deserves careful analysis, not a guess.

If you would like to see how the numbers apply to your situation, we would be happy to run a personalized Social Security analysis, review your break-even ages, and evaluate how the timing fits with your broader retirement income and tax plan. You can schedule a meeting with one of our Certified Financial Planners here.

Want to Go Deeper?

We recently sat down with a Social Security specialist to walk through claiming strategies, spousal coordination, and how to think about the program’s future. If you found this article helpful, the webinar goes into even more detail. Watch the full webinar recording.

team@stablerwm.com | (425) 646-6327

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This material is for educational purposes only and is not intended as tax, legal, or investment advice.

Securities and Advisory services are offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. Stabler Wealth Management is not registered as a broker-dealer or investment advisor.