Why Social Security Is Such a Big Deal
Social Security isn’t just a line item in your retirement plan. It’s a deeply emotional, widely misunderstood, and highly consequential decision that touches nearly every American. Whether someone has $5,000 in savings or $5 million, they want to get this one right. Google searches for Social Security far outpace searches for tax strategies, estate planning, or even investment allocation. That tells you something.
Why? Because the stakes are high, and the questions feel personal: “When should I claim? Will Social Security still be around? What if I wait and die too soon?” This isn’t just about optimizing income – it’s also about uncertainty, regret, and reassurance. And that’s what this blog is about: how to help you make better Social Security decisions that are technically sound but also human.
Key Takeaways:
- There’s no one-size-fits-all answer. Claiming Social Security is as much about lifestyle, health, and peace of mind as it is about maximizing lifetime income.
- Timing your claim impacts more than just benefits. The age you claim can affect your portfolio withdrawal strategy, tax bracket, Medicare costs, and overall financial flexibility.
- Behavioral and emotional factors matter. People often fear dying early more than outliving their money—so regret, flexibility, and how you value money today should shape your decision.
- You have options, even after retirement. Flexibility is built into the system between delayed claiming, retroactive benefits, and the ability to reassess annually—if you know how to use it.
The Basics of Claiming
Most articles and retirement calculators simplify Social Security to one question: Should I take it early or wait? The answer lies in understanding what’s being offered.
You can start claiming Social Security as early as 62 and as late as 70. The longer you wait, the higher your monthly benefit. In fact, the difference between claiming at 62 versus 70 is about a 75% increase in benefits received. That sounds like a slam dunk for waiting. But life isn’t always lived in spreadsheets.
Social Security uses the term Full Retirement Age (FRA). It is 67 for those born in 1960 or later. If you claim before FRA, your benefits are reduced. If you delay beyond FRA, you get delayed retirement credits (about 8% per year) up until age 70.
But all this rests on a deeper truth: claiming early means more years with money in hand. Claiming later means a larger check, but for fewer years. Which one is “right” depends on a dozen interlocking factors such as life expectancy, health, portfolio size, employment plans, and emotional peace of mind.
The Three Core Types of Benefits (And Why They Matter)
To make a smart claiming decision, you need to understand which type of Social Security benefit you’re eligible for. This isn’t just a bureaucratic detail. It can significantly change your strategy.
Own Benefit
This is based on your work history and the amount you’ve paid into the system. Your Primary Insurance Amount (PIA) is the amount you’d receive at your Full Retirement Age. If you claim before FRA, you get less. If you wait, you get more.
Spousal Benefit
If you’re married (or were married), you may qualify for up to 50% of your spouse’s PIA. Importantly, this benefit is also reduced if you claim before FRA. However, it does not increase if you wait beyond FRA. That’s a critical difference.
Also worth noting is that you can’t choose to claim only your spousal benefit while letting your own benefit grow anymore. That loophole is closed.
Survivor Benefit
This kicks in if your spouse dies. You may be eligible to receive their benefit instead of your own, whichever is higher. Survivor benefits have a different reduction schedule and include specific protection, so they aren’t overly reduced just because the deceased spouse claimed early.
Each benefit type interacts differently with claiming age, marital status, and timing. And these interactions are where planning opportunities (or costly mistakes) lie.
Why It’s Not Just About Math
If you Google “When should I claim Social Security?”, you may find articles that sound like investment pitches: “Where else can you get an 8% guaranteed return?” That’s a catchy headline that ignores something bigger, and that is the human side of the decision.
For many retirees, this isn’t just about maximizing dollars. It’s about managing regret, and uncertainty. People don’t live by actuarial averages. They live unique lives filled with unknowns, and they make choices accordingly.
Sure, delaying benefits gives you a higher monthly check. But claiming early offers:
- Peace of mind during a market downturn
- Flexibility when you’re healthy enough to travel
- Reduced stress when you’ve just left your job and don’t want to draw from investments
Conversely, delaying benefits may offer:
- Higher lifetime income (if you live long)
- Greater survivor benefits for your spouse
- Inflation protection in late retirement years
Here’s the catch: every pro comes with a con. The “right” decision is the one that fits the life someone wants to live, not just the spreadsheet they print out.
Different Viewpoints: Real-World Claiming Philosophies
The truth is that claiming Social Security is a deeply personal decision. Even the experts don’t agree on a single “best” strategy because every person, while maybe similar, is still different.
How We Can Help You Clarify the Trade-Offs
Most financial plans give you a table: “If you claim at 62, here’s your benefit. At 67, it’s higher. At 70, highest.” What they don’t show you is how that decision affects the rest of your retirement plan.
We take you beyond the standard approach and instead test how different claiming ages impact:
- Portfolio longevity
- Income flexibility
- Sequence of return risk
- Survivor benefits
- Real-life utility of income
Visualizing Real World Life Expectancy Scenarios
We can create a heat map that shows thousands of combinations between claiming dates (e.g., husband at 67, wife at 65). We can then adjust life expectancy assumptions, apply “fudge factors” to mortality, or simulate benefit cuts. You can even add opportunity cost – discounting future dollars to better reflect how you may value money today.
This helps your decision become less theoretical and more visual, intuitive, and real. It is very important to remember that even though this can be powerful insight, it isn’t about perfection; it’s about spending.
Opportunity Cost and Portfolio Risk: The Hidden Forces
When someone delays Social Security, they aren’t just choosing a higher future benefit. They’re also making a trade-off with their portfolio, whether they realize it or not.
Opportunity Cost
If you wait to make a claim, you’ll need to draw more from your investments to fund retirement in the meantime. That means selling assets, potentially in a down market, and missing out on growth. This is the opportunity cost of delaying. A dollar not spent from Social Security is a dollar pulled from somewhere else.
Sequence of Return Risk
Now, imagine you retire into a market downturn. With no Social Security check coming in, you’re pulling more from your investments at the same time that they’re falling in value. That accelerates portfolio depletion—a problem known as sequence of return risk.
The Paradox
Interestingly, both strong and weak markets can argue for claiming early:
- In a bad market, early Social Security buffers your portfolio.
- In a good market, claiming early lets you leave more money invested.
So, what’s “better”? That depends on what you value more: predictable income or maximum income later.
The Solvency Question: What If Social Security Gets Cut?
This is the elephant in the room.
Clients ask it all the time: “What if Social Security runs out of money?” And they’re not wrong to worry. The latest Social Security Trustees Report projects that by 2033, the program’s trust fund could be depleted. At that point, if Congress makes no changes, benefits may be reduced by about 21%.
That possibility creates a powerful incentive to claim early, even if it’s not optimal on paper. Most policy experts expect that Congress will eventually act. Historically, they have. In 1983, for example, lawmakers raised the full retirement age and taxed benefits to preserve solvency.
Still, it’s prudent to model “what if” scenarios:
- What if benefits are reduced in 2033?
- What if only higher-income retirees are affected?
- What if inflation adjustments change?
We have tools that allow you to simulate benefit cuts, showing how earlier claiming might become more appealing if reductions loom.
A Subtle Shift: Behavioral Impact
Even if benefit cuts don’t materialize, perception shapes behavior. People who fear missing out are more likely to claim early. And sometimes, respecting that fear matters more than debating it with yourself or loved ones.
Longevity, Utility, and the Psychology of Regret
Most advisors talk about longevity risk, which is the fear of outliving your money. But in the real world, many people are more worried about the opposite: dying too soon and never getting their money’s worth. This is mortality risk, and it creates a psychological barrier to delaying Social Security.
What If I Wait and Don’t Make It?
If you delay until 70 and die at 71, you’ll have received just one year of benefits. That feels like a loss. But mathematically, it was a hedge against longevity.
Now flip it. If you claim at 62 and live to 90, most people don’t lie awake at night regretting they didn’t delay. Why? Because the pain of a visible loss (dying early and missing benefits) is greater than the pain of a theoretical missed gain (living long and collecting less).
Declining Utility with Age
There’s also this: money is more valuable when you’re younger and healthier. Taking benefits early might reduce total dollars over your lifetime, but those dollars may bring more joy when spent on travel, hobbies, or family while you’re in your 60s.
Regret Is Asymmetrical
- Delaying and dying early = regret
- Claiming early and living long = mild annoyance, at most
Understanding this asymmetry is crucial, both emotionally and practically.
Social Security Is Not an Island: Think Holistically
One of the most common mistakes people make when evaluating Social Security is treating it as a stand-alone decision. But in real life, it’s woven into a much larger financial web—investments, taxes, healthcare, and goals.
It’s Not Just When, It’s What Else
The timing of Social Security affects:
- Roth conversions: Claiming early increases income, which may push clients into higher tax brackets and limit conversion opportunities.
- Medicare premiums: Higher income can trigger IRMAA surcharges on Medicare Part B and D premiums.
- Portfolio withdrawals: Early benefits reduce strain on investments. Delaying benefits increases reliance on the portfolio.
Legacy planning: Higher Social Security income may reduce how much money is left for heirs in taxable accounts.
How Advisors Add Value
Advisors can help emphasize that Social Security claims should happen in the context of an entire plan, not in isolation. They can bring in specialized tools that can model how Social Security timing impacts taxes, asset drawdowns, spending levels, and longevity risk in one unified picture.
It’s the difference between simply asking “What’s the best age?” and “What’s the best outcome, given everything else you care about?”
Flexibility and Optionality: The Power of “Wait and See”
One of the most overlooked advantages in Social Security planning is that you don’t have to make a permanent decision all at once. In fact, flexibility is built into the system—if you know how to use it.
The 6-Month Retroactive Option
Once you reach Full Retirement Age (FRA), you can apply for benefits and request a retroactive start date—up to six months prior. You’ll receive a lump sum of back pay, but your ongoing monthly benefit will be calculated as if you had claimed at the earlier date.
This option:
- Offers a kind of “safety net” if your situation changes quickly
- Gives clients the confidence to wait without feeling boxed in
Annual Re-Evaluation: “Kick the Can” Planning
Social Security isn’t binary—claim now or wait until 70. Between FRA and 70, you can revisit the decision annually (or even monthly). This year-by-year review allows you to:
- Reassess health status
- Assess market performance
- Adjust for unexpected spending needs
This approach acknowledges that life is unpredictable and allows clients to change course as needed.
Withdrawal of Application: The One-Time Reset
If you’ve already started benefits but regret it, you can withdraw your application within 12 months, repay what you’ve received, and start fresh later. It’s a one-time reset, and it comes with rules—but it offers a second chance if you act quickly.
The Real Point: Better Conversations, Not Perfect Projections
Social Security decisions are rarely made in Excel. They’re made at kitchen tables, doctor’s offices, and conversations filled with hopes, fears, and trade-offs.
And that’s the real takeaway from this entire discussion: Your advisor’s job isn’t to “solve” Social Security for you. It’s to listen, illustrate, and guide you to the most reasonable decision.
You can run the numbers 15 ways and still not arrive at a definitive answer. Why? Because the most important inputs—your health, priorities, fears, and future—are unknowable.
Plan for a Life, Not Just a Lifetime
Delaying Social Security might produce more income on paper, but what’s the point if it prevents someone from traveling, retiring, or enjoying their 60s?
A good saying we once heard was, “You’re not optimizing for maximum money. You’re optimizing for maximum meaning.”
Conclusion
Social Security claiming isn’t about chasing the biggest benefit. It’s about choosing the benefit that fits the life you want to live. Whether someone delays to 70 or claims early at 62, the best decision is the one you understand, believe in, and feel good about.
What worked for your neighbor or coworker does not mean it is right for you. Before making any changes, preparation and approaching them with realistic expectations are key. After interviewing and consulting with thousands of investors, we have found that they all eventually fall into the same trap—their investments did not match their expectations, causing an emotional reaction.
We will present you with a fuller, more reliable expectation picture of your investments. This allows you to confidently navigate down whatever investing path you decide. Spend a few minutes with us to see if we are a good fit for each other.
The Porter Investments Strategies were developed by our President and founder, Bob Porter. His prior work at Fidelity Investments allowed him the opportunity to advise and study a diverse group of investors.
