Making Cents: Social Security is a Moving Target

US Wealth Napolitano |

By: John P. Napolitano, CFP®, CPA, PFS, MST, RLP®

Planning for social security has been getting a fair amount of attention in the past several years. With last year’s abolition of what was known as the ‘file and suspend’ rules, one material planning opportunity is lost but many still exist for most taxpaying retirees. In prior generations, people simply stopped working and began collecting their checks without much planning or thought. For very wealthy people, the decision regarding when to collect may not matter overall to their wealth health. But for anyone, including the wealthy, a little planning around the when to start collecting can mean a difference of tens of thousands of dollars over a normal life expectancy.

Planning for social security benefits starts with the decision regarding when to claim benefits. No one has a crystal ball, but understand the facts first. If you start collecting before what is considered your normal retirement date (currently age 66 for many), your benefit will be about 6.67% less for each year that you start before the normal retirement age. Conversely, if you wait until after normal retirement age to start collecting you’ll get an 8% income increase for each year that you delay the start of benefits. To learn what your normal retirement age is go to the social security website, to get a summary of your benefits. In fact, since those nifty little benefits statements stopped coming a few years ago, it is good practice to go there anyway just to be sure that everything still appears accurate.

Obviously, people in bad health should consider taking the income early. One of the biggest problems for these people is their bad estimate of their own longevity. If you start collecting too soon, and live too long, you could be costing yourself thousands.

The answer is also different when you consider the impact of a surviving spouse. If the larger earner waits until age 70 to collect, a break-even period can be calculated. This means that you can know in advance of collecting how long that one of you would have to live in order to make that delay decision profitable for you. Generally that break-even occurs in your early 80’s.

Many wonder about the viability of the Social Security system in general. The pure facts are this.  Forecasts suggest that the trust fund containing the assets to fund social security will run dry in 2036. That doesn’t mean that social security disappears. It means that payroll tax collection forecasts in 2034 predict that about 79% of the outbound benefits will be covered by the incoming tax. This can be solved many ways. Amongst the issues being bantered about are increasing the income level that is taxed for social security, further delaying the normal retirement date, reducing benefits, or means testing recipients.

As we’ve seen before, rules can change very quickly.  Keep your plan flexible, and understand the implications of any of the above in your retirement years.


John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA.  Visit JohnPNapolitano on LinkedIn or The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.