Retirement Planning /

Social Security Benefits – What To Consider Before Applying

Published by Bob Gustafson

Social Security Benefits - What You Should Consider Before Applying

Before jumping into our discussion, it’s important to note that the Social Security program is complicated. It’s not as straight forward and easy to understand as some people may believe. There are things you need to think about before signing up for the benefits.


The first thing to consider is timing. When is the optimal time to sign up? As always, it will depend on your personal situation. But here are a few tips to consider.

Each year you delay signing up, your benefit increases by eight percent. In a low interest rate environment, this is a significant amount of money! But you need to ensure you can afford to delay. You’ll need to have enough money from other sources to live while you delay your social security benefit.

You also need to assess how long you (and your spouse) will live. While no one can predict longevity with much accuracy, you can look at how long older members in both of your families have lived. And if both of your family’s genes aren’t very good and people tend to die young, then it wouldn’t make sense to delay.

But before making any decisions on timing, it’s important to consult an expert to help you with this important decision

Survivor Benefits

Survivor benefits typically go to the spouse or a former spouse of someone who was receiving or was eligible for Social Security benefits but there are several exceptions for eligibility.

The amount the surviving spouse receives will depend on:

  • Whether the spouse is at full retirement age
  • When the deceased spouse started taking benefits
  • The amount of Social Security the spouse has available based on his or her own work history
  • The amount, if any, the spouse receives from a government pension

In addition, the spouse will qualify for survivor benefits if they are at least 60 and have been married to the deceased for at least nine months. But this also comes with exceptions.

Provisions and Offsets

As stated earlier, Social Security is complicated with subtle nuances. For example, you may receive information stating you’re going to receive a specific dollar amount each month from social security. However, depending on your situation, you may not actually receive that amount. It may be lower and here’s why.

If you work for a private company and are covered by social security, but your spouse works in a municipality where there’s a state pension, there are offsets to social security that you need to be aware of. In this instance, you need to perform some comprehensive research and/or seek the help of an expert who can help you understand the process.

Years of Employment and Income Levels

When Social Security calculates your retirement benefit, they look at your earnings history. They take the 35 years where you had the most income and calculate the average index of monthly earnings to come up with your monthly amount. The good news is that the index they use will take into account inflation over the course of your career. But the bad news is that if you don’t have 35 years of employment, then you’ll get zeroes for those years. So, if you only have 34 years, you may want to work an extra year before collecting social security.

Your accountant has probably told you that you only need to keep your tax returns for seven years. However, when you start collecting social security retirement benefits, sometimes they have your income levels wrong. If you can’t prove your earnings were higher than what’s on file, then you may not receive as much money from Social Security as you should. So, it’s critical to check what Social Security has for your earnings on file. And it’s also important to keep records in case you run into this issue.


Social Security benefits are taxable. These benefits are considered income and you have to pay tax on them which is a surprise to most people. You need to plan when you should apply for your benefits if you:

  • Are still working. You may want to delay taking the benefits until you retire or work part-time. If your income puts you in a higher tax bracket, your social security benefits may be taxed at the higher rate.
  • Have to take required minimum distributions from a retirement account. You might want to consider the impact of that income from a retirement account on the Social Security benefits.

The last two pieces of advice:

  • One, start researching Social Security long before you get into your retirement years, and
  • Two, work with an expert to come up with a plan that works best for you and your personal situation.

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