Your 2024 Social Security Guide

By Brett Gottlieb

​​The period leading up to retirement can often come with a mix of emotions. You might feel excitement for the new chapter ahead, stress about the logistics, and confusion about how to seamlessly align all the elements of your financial plan. You’ve probably thought about Social Security and how to position and claim your benefits as a part of your retirement strategy.

To help you sift through these questions and make the right choices for your golden years, we’ve created this guide. We hope our exploration of strategies for couples and examples of how the timing of your benefit claims can impact your overall benefits will clarify the Social Security process.

Factors That Determine Your Social Security Benefits

The Social Security Administration (SSA) calculates your benefits using a formula based on your lifetime earnings and specifically, they consider your 35 highest-earning years. To qualify for benefits, you need to have worked for at least 10 years. If you’ve worked for fewer than 35 years, the years you haven’t worked are factored in with zeros. Additionally, all past earnings are adjusted to account for changes in wage levels to create accuracy in reflecting your wage growth.

Once your average monthly earnings for your top 35 years are calculated, a special formula is applied and the result is your primary insurance amount (PIA). The PIA is the benefit you are eligible to receive when you reach full retirement age (FRA).

The actual benefit you receive may not be your PIA. This is because your PIA will be increased or decreased depending on when you choose to receive benefits. Taking benefits before FRA will reduce your benefit, and waiting until after FRA will increase your monthly benefit. Also, starting at age 62, your eligible benefits will receive regular cost-of-living adjustments (COLA).

Spousal Benefits

Married people are eligible for benefits based on their spouse’s work history. The spousal benefit is 50% of the working spouse’s earned benefit. In order to receive these benefits, the working spouse must be at least 62 and have already filed for benefits.

If you are divorced, you may also be eligible to receive spousal benefits based on your ex-spouse’s work history. Your marriage needs to have lasted at least 10 years, you must be divorced for at least two years, and you must still be single. In addition, you need to be at least 62 and not eligible for a higher benefit amount based on your own work record. Unlike spousal benefits for married people, your ex-spouse does not need to have filed for benefits in order for you to claim them. 

When You Can Claim Your Benefits

You have the option to claim your Social Security benefits anytime from age 62 to age 70. There’s no extra benefit increase if you wait beyond 70. However, the age you choose to start collecting benefits before 70 will affect the amount you receive.

Early Retirement

You can start receiving benefits as early as 62, but your monthly benefit will be lower than if you waited longer. Your basic benefit is reduced a fraction of a percent for each month you begin receiving benefits prior to full retirement age. Retiring early can permanently reduce your benefit by up to 30%.

Full Retirement Age

Your full retirement age (FRA) changes based on the year you were born. FRA is 66 for those born between 1943 and 1954 and increases by two months for every year after that you were born until it settles at age 67 for those born in 1960 or later. If you wait until you reach full retirement age to begin collecting your Social Security benefits, you will receive the full PIA that you have earned.

Delayed Benefits

If you’re still working or don’t need the money immediately, you can delay receiving your benefits. Your benefit will increase by 8% for each year that you delay, with a maximum possible increase of 32%. You cannot delay and increase your benefit indefinitely, though. Once you reach age 70, the amount of benefits you receive will not increase any further.

The Ideal Time to Start Claiming Benefits

While you’re employed, raising your future Social Security benefits is possible by earning a higher income. However, once you exit the workforce, your control over your benefits narrows down to when you decide to start claiming them. The timing of your decision may significantly affect the benefit amount you’ll receive and requires thoughtful consideration.

Social Security Statement

An important document that you will reference during the decision-making process is your Social Security statement. The Social Security Administration mails statements to workers age 60 and over who aren’t receiving Social Security benefits and do not yet have a my Social Security account. These statements will be mailed out three months prior to your birthday, but you can also access the same information by setting up an account on their website. 

The statement will tell you your:

• Estimated benefit if taken at age 62
• Estimated benefit if taken at FRA
• Estimated benefit if taken at age 70
• Estimated disability benefit
• Estimated family and survivor benefits
• Medicare information
• Earnings history

All benefit amounts listed are estimates and subject to change. They are calculated based on your date of birth and future estimated taxable earnings.

It is important to review your earnings history and check for accuracy. Your benefit is calculated based on those numbers, so any mistakes can affect your benefits. You should correct any errors as soon as possible.

Determining the Optimal Time to Claim Benefits

Your Social Security benefits are calculated through intricate actuarial formulas that consider your life expectancy and the projected rates of return. They aren’t intended to favor early or late retirement. Assuming you live as expected, the total payout you receive over your lifetime should roughly balance out whether you claim benefits at age 62, age 70, or anywhere in between. Essentially, you’ll receive either a smaller monthly payment spread out over a longer period or a larger monthly payment condensed into a shorter time frame.

The best time for you to claim your benefits depends on your personal situation and health. If you expect to live longer than average, your overall lifetime benefit will be greater if you delay claiming your benefits to increase your benefit amount. If the opposite is true and you see little chance of making it into your mid-80s, you would likely receive a greater lifetime benefit by taking it sooner, even though it would be a smaller monthly payment.

Once you decide when you want to start receiving benefits, remember to complete your application three months before the month in which you want your retirement benefits to begin.

Strategies Married Couples Can Use to Optimize Benefits

Married couples have additional considerations when it comes to filing for Social Security benefits since they can potentially receive their own or a spousal benefit. By creating a strategic approach, married couples can optimize their benefits.

In many instances, it may be wise for the lower-earning spouse to start collecting benefits early, while the higher-earning spouse delays claiming for as long as they can. This approach allows access to the lower benefit while maximizing the higher one.

Often, it is the husband with the higher benefit and the wife with the lower one. Women also tend to live longer than men. By following this strategy of waiting as long as possible to claim the higher benefit, you not only maximize the husband’s retirement benefit for use while he is alive, but it also maximizes the wife’s survivor benefit when he passes away.  

Restricted Application

While it used to be a popular claiming strategy, the Restricted Application is now only available to those born before January 2, 1954. By restricting your application, you can receive a spousal benefit if your spouse is already collecting benefits while allowing your own benefit to continue to grow until age 70. That way, you can begin to receive spousal benefits while maximizing your own benefit.

The Impact Working Has On Benefits

Your benefits remain unaffected by work once you reach Full Retirement Age (FRA), but it does before that. Only earned income, such as wages and self-employment earnings, impacts your Social Security benefits. Income from investments, pensions, and annuities will not affect Social Security benefits.

If you’re under FRA for the entire year, your Social Security benefit is reduced by $1 for every $2 you earn over $21,240. In the year you reach FRA, your benefit is reduced by $1 for every $3 you earn over $56,520. Once you hit FRA, your benefit is no longer reduced, regardless of your earnings. These dollar amounts are adjusted annually, so your benefit may change in subsequent years.

2024 Cost-of-Living Adjustment (COLA)

In 2024 the COLA is 3.2%, with 2023’s 8.7% increase the biggest seen in 40 years. There is also an increase in the Social Security tax cap. The cap is increased from $160,200 to $168,600, meaning Social Security taxes will not be withheld from income earned above that amount.

This substantial increase in benefits will hopefully provide retirees some relief from the rising cost of goods and services. Historically, a COLA that fails to keep pace with inflation only serves to exacerbate financial hardships. It’s important to keep in mind that the COLA will affect pre-retirees and retirees differently. Here’s what to expect based on where you are in your retirement journey.

Retirees Taking Social Security

While this increase is good news for retirees, it’s not a license to change spending habits all that much—as most retirees know all too well.

It will still be necessary to keep track of your finances, spending—and, importantly, your tax liabilities; some beneficiaries could experience increased taxes in the coming years, depending on their thresholds.

Retirees Not Taking Social Security

Retirees who have not started claiming Social Security will still reap the benefits of this increase even if they don’t take Social Security this year. There is never a decrease in the COLA, so the higher payments are here to stay. Keep in mind that, in some cases, it’s worth holding off taking Social Security for several years once you’re eligible as discussed above. Of course, the benefits of doing so vary based on individual circumstances.

Collaborate With a Trusted Professional

Navigating when and how to claim your Social Security benefits is a pivotal decision that hinges on your personal situation and savings. Given the complexity of this process, seeking guidance from an experienced financial professional can help you come to a clear, confident answer on how it factors into your strategy and retirement plan.

At Comprehensive Advisor, our goal is to guide our clients through the ins and outs of Social Security to help prepare you for the next stage of life. If you’re nearing retirement and have questions about integrating Social Security into your financial plan, we’re here to assist. Reach out to us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to get started today.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial strategies for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a comprehensive retirement roadmap to help ensure their assets are preserved and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. Insurance products are offered through the insurance business C.A. Financial & Insurance Services. Comprehensive Advisor, LLC is an Investment Advisory practice that offers products and services through AE Wealth Management LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by C.A. Financial & Insurance Services are not subject to investment Advisor requirements. CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc., generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.  2274497 – 3/24