Understanding what's the right strategy for Social Security is essential, especially for high-net-worth individuals who view retirement not as an end, but as a transition into a more purposeful and financially efficient stage of life. While Social Security benefits may not be your primary source of retirement income, making the right decision about how and when to claim them can significantly influence your monthly benefit, long-term tax exposure, and the financial security of a surviving spouse.
A well-structured Social Security strategy helps preserve investable assets, maximize your Social Security payments over time, and integrate seamlessly into your broader retirement planning. As your certified financial planner, our role is to ensure you collect benefits based on a plan that considers your earnings record, marital status, life expectancy, and long-term goals.
Understanding the Basics of Social Security Benefits
When Can You Claim?
You can claim Social Security retirement benefits as early as age 62. However, doing so results in permanently reduced monthly payments. For individuals born in 1960 or later, your full retirement age is 67. This is the point at which you are eligible to receive 100% of your primary insurance amount, which is the benefit amount you’ve earned based on your earnings history.
If you decide to wait until age 70 to start benefits, you will receive an increase in your monthly benefit through delayed retirement credits. This annual increase is roughly 8%, providing a substantial incentive for delaying Social Security. It’s worth noting that you cannot increase your benefit amount by waiting beyond age 70.
How Benefits Are Calculated
The Social Security Administration determines your monthly benefit using a formula that factors in your average indexed monthly earnings (AIME) over your 35 highest-earning years. If you don’t have a full 35-year earnings record, the SSA includes zero-income years, which can lower your primary insurance amount and reduce your retirement benefits.
Higher lifetime earnings typically lead to higher Social Security payments. For high earners, even working a few additional years in your 60s can increase future benefits by replacing lower-earning years on your own earnings record.
Timing Is Everything: When Should You Claim?
Early vs. Delayed Claiming
Choosing when to claim Social Security benefits depends on many variables. Taking benefits at age 62 might make sense if you need immediate income, but it will permanently reduce your monthly benefit amount. If you choose to wait until full retirement age or even wait until age 70, you will receive larger monthly social security checks that can significantly boost your retirement income.
This tradeoff between starting early and waiting is central to your Social Security strategy. For high-net-worth individuals who have the means to delay, the long-term financial benefits often outweigh the short-term gains of early claiming.
Break-Even Analysis
A break-even analysis can help determine the most financially sound age to begin collecting Social Security. This analysis considers your life expectancy and the total value of benefits over time. If you live beyond your early 80s, delaying benefits typically results in greater lifetime benefits.
This calculation becomes even more critical when factoring in survivor benefits. When one spouse passes, the surviving spouse may receive the higher of the two benefits. For this reason, the higher earning spouse often chooses to wait until age 70 to start benefits.
The Power of Delayed Retirement Credits
If your full retirement age is 67 and you wait until age 70, you will receive three years of delayed retirement credits. This increases your monthly Social Security benefit by 24%, plus any applicable cost-of-living adjustments. While not technically compound interest, the value of these delayed credits in the context of a secure retirement is undeniable. These credits are especially beneficial for individuals in good health with a family history of longevity.
Advanced Strategies for High-Net-Worth Individuals
Coordinating Social Security with Other Income Sources
When developing a retirement income strategy, it’s important to coordinate your Social Security benefits with other retirement income sources, such as pensions, taxable investments, or distributions from an individual retirement account (IRA). In some cases, it may be tax-efficient to take withdrawals from retirement accounts in your 60s while delaying Social Security until age 70.
This approach allows you to reduce future required minimum distributions, manage your tax brackets, and maximize your Social Security over your lifetime. It can also create opportunities for Roth conversions, especially in years when your combined income is relatively low.
Spousal Claiming Techniques
Spousal benefits offer additional planning opportunities. A lower earning spouse can receive up to half of the higher earning spouse's benefit payments, provided they start at full retirement age. If they claim early, the benefit is reduced. These spousal benefits are based on your spouse’s primary insurance amount and are not affected by your own earnings record.
Coordinating the timing of spousal benefits can maximize your Social Security income over time. In many cases, the higher earning spouse delays benefits until age 70 to maximize both their own benefit and the potential survivor benefits that a surviving spouse may receive later.
The Bridge Strategy
The bridge strategy involves using taxable or retirement savings to cover living expenses while delaying Social Security benefits. By doing so, you can increase your monthly benefit and potentially reduce your lifetime tax burden. This strategy works particularly well for clients who retire before full retirement age and have significant assets to draw from.
For example, using IRA distributions or portfolio withdrawals from age 62 to 70 may allow you to wait until age 70 to claim Social Security benefits, while managing capital gains and limiting exposure to higher tax brackets.
Common Pitfalls and Mistakes to Avoid
Claiming Too Early Without Need
Claiming Social Security at age 62 may lead to benefits at age 62 that are up to 30% lower than if you waited until full retirement age. For individuals with other sources of retirement income, starting benefits early can reduce your future financial flexibility and shrink survivor benefits. Unless necessary, it’s often a mistake to claim early without a well-structured plan.
Not Considering the Tax Implications
Many retirees are surprised to learn that up to 85% of their Social Security income can be taxable, depending on your combined income. This includes adjusted gross income, nontaxable interest, and half of your Social Security payments. Strategic income planning can help you manage when and how to receive income, so you pay taxes only when necessary and avoid pushing yourself into a higher bracket.
Overlooking Medicare and Healthcare Coordination
Social Security and Medicare are closely linked. Enrolling in Social Security before age 65 automatically starts your Medicare enrollment process. High-income retirees may also face IRMAA surcharges, which increase your Medicare premiums based on your income level. Coordinating your benefits with your healthcare planning is an important step in creating a sustainable and cost-efficient retirement.
Working While Collecting Benefits
The Earnings Test (Pre-FRA)
If you decide to start collecting benefits before reaching full retirement age and continue working, the Social Security Administration imposes an annual earnings limit. In 2026, the annual earnings limit is $22,320. If you exceed this threshold, benefits withheld amount to $1 for every $2 you earn over the limit.
These withheld benefits are not lost forever. Once you reach full retirement age, your monthly benefit will be recalculated to account for the months your benefits were reduced due to excess earnings.
Post-FRA Considerations
After reaching your full retirement age, you can earn any amount from continued employment without having your Social Security payments withheld. In fact, if your current earnings are higher than previous years used in the 35-year earnings record, the Social Security Administration will automatically recalculate your benefit, potentially increasing your monthly social security check.
Social Security and Longevity Planning
Planning for Age 90 and Beyond
For individuals with a long life expectancy, delaying benefits until age 70 acts as a form of longevity insurance. Social Security is one of the few sources of guaranteed lifetime income that adjusts for inflation. Maximizing Social Security by waiting to claim can protect your future self against market volatility, inflation, and longer-than-expected lifespans.
Scenario Modeling for Long-Term Planning
Scenario modeling helps evaluate different claiming strategies under various assumptions about life expectancy, investment returns, and spending needs. This is particularly useful for married couples planning to coordinate spousal benefits and survivor benefits. We run these analyses for clients to determine which approach will best support their financial future.
Social Security in the Bigger Picture
Integrated Retirement Income Planning
A sound Social Security claiming strategy should be part of a broader retirement planning approach. This includes managing distributions from retirement accounts, evaluating investment strategies, and identifying tax-saving opportunities. When done right, these components work together to maximize your retirement income while preserving wealth for future generations.
Estate Planning and Legacy Considerations
When one spouse passes, the surviving spouse typically receives the higher of the two Social Security benefits. This makes it critical to plan strategically for the higher earning spouse to delay benefits when possible, thereby maximizing the survivor benefits. This decision can directly impact the estate value and the financial security of family members.
FAQs – Social Security Strategy for High Earners
What’s the best age to claim Social Security if I don’t need the income?
Waiting until age 70 typically offers the largest monthly benefit. For high earners who don’t rely on Social Security income, waiting makes sense for maximizing lifetime benefits and survivor benefits.
Does it make sense to delay if I have a large IRA?
Yes. Delaying Social Security allows you to draw down taxable accounts more efficiently, potentially reducing future RMDs and allowing for tax strategies like Roth conversions.
Can I change my mind after I’ve claimed?
Yes, within 12 months of claiming benefits, you can withdraw your application and repay the benefits. After that window, your options are more limited, though you can suspend benefits at full retirement age to earn delayed credits.
How are Social Security benefits taxed for high-income retirees?
Up to 85% of your benefits may be taxable if your combined income exceeds certain thresholds. A certified financial planner can help minimize this impact with smart income timing and distribution strategies.
Should I claim early and invest the money?
While some consider this, the guaranteed increase from delaying benefits is hard to match with market returns of equal risk. In most cases, it makes sense to delay.
Conclusion: Making the Most of Your Social Security
Making the right decision about your Social Security claiming strategy can have long-lasting effects on your retirement income, tax exposure, and legacy. For high-net-worth individuals, this choice should not be made in a vacuum. A strategic, well-modeled approach allows you to maximize your Social Security benefits and preserve the financial resources you’ve worked hard to build.
A customized strategy designed with your life expectancy, marital status, earnings history, and financial goals in mind is essential. At Towerpoint Wealth, we help clients align their Social Security decisions with the rest of their retirement and estate plans—ensuring every piece works together to support their secure retirement.
Let’s talk about how to build a Social Security strategy tailored to your unique financial goals.
