Creating a steady income stream in retirement can be a complex puzzle, only part of which involves tapping into your 401(k) or IRA. Another critical factor is choosing when to claim your Social Security benefits, a government-guaranteed source of income funded by taxes and designed to supplement your savings. Depending on your financial status, Social Security could play a vital role in your retirement strategy, or it could be a minor addition to a robust nest egg. Either way, how you time your benefits will affect the size of your checks and, consequently, how much of your savings you’ll have to spend.

In this overview, we’ll cover the basics of Social Security and offer some general guidance to help you plan ahead and make more informed retirement decisions. ‍

‍How Social Security Works

‍Initiated by Franklin Roosevelt in 1935, the U.S. Social Security program provides financial assistance for the elderly and disabled, as well as those whose spouses have passed away.

Social Security is funded by payroll taxes. As long as you’ve been in the workforce, a portion of every paycheck has gone directly to FICA tax (named for the Federal Insurance Contributions Act). For 2025, the standard FICA tax is 7.65% of gross pay, and your employer matches that amount (if you’re self-employed, you pay the full 15.3% but can deduct half the expense). Those taxes go toward Social Security and Medicare programs, both of which benefit you later in life. To qualify for Social Security benefits, you must be “fully insured,” which requires you to earn credits by participating in the workforce and paying taxes; most workers need at least 40 credits to qualify, which equates to about 10 years of work.

Unlike your retirement funds, the money you contribute to Social Security isn’t set aside specifically for you. It goes into a general trust fund used to pay benefits to current retirees. In turn, when you claim Social Security benefits, the income you receive will be funded by the working taxpayers who come after you.‍

‍Can You Count on Social Security?

‍Social Security can provide additional cash flow in retirement, but it’s important to understand that it may not cover all your expenses if you’re counting on it as a sole source of income. For many people, their Social Security benefits may not provide enough money to live comfortably and cover all expenses for healthcare, housing, food and more.

Furthermore, while Social Security is often referred to as “guaranteed” income in retirement, that can be a little misleading. The program faces some complex long-term funding challenges, strongly tied to the massive wave of Baby Boomers now in and approaching retirement. Without Congressional intervention, the Social Security trust fund could be depleted and lead to reduced benefits starting around 2035. While it’s highly unlikely that Congress would vote to do away with Social Security altogether, it’s impossible to know for sure—especially if your retirement is still decades away.

For both of those reasons, it’s highly advisable to build your own retirement savings through the years and think of Social Security as “bonus income.” Prepare for the unexpected and “stress-test” your retirement plan to help ensure you can enjoy your golden years without worrying about outliving your savings or needing additional income. ‍

‍How Much Money Can You Expect?

The amount of your Social Security payments will depend on multiple factors, including your age, how many years you worked, your earnings history (which corresponds with how much you paid into the system), and when you decide to claim the benefits.

As of 2025, the average Social Security benefit for retired workers is about $2,000 per month and the maximum possible benefit is $5,108 per month. These amounts are adjusted for inflation each year.

With so many variables affecting your payout, the best way to estimate your benefits is to use the collection of calculators on the Social Security website.

How Timing Changes Your Benefit Amount

You have a choice as to when you start receiving your Social Security benefits, and it could be one of the most important financial decisions you ever make. That’s because the age at which you claim your benefits dramatically impacts the size of the monthly payment you’ll receive for the rest of your life. Simply put, the longer you wait, the more you’ll get—but that doesn’t mean waiting is always the best choice (more on that later).

Before we breakdown the options, you first need to understand what the government calls “full retirement age.” As of 2025, anyone born in 1960 or later has a full retirement age (FRA) of 67. If your birth year was earlier, your FRA will be somewhere between 66 and 67 (find your FRA here); this is because, in 1983, Congress began gradually raising the retirement age to reflect the trend toward longer and healthier lifespans.

Now, there are three main options (not including disability or the death of a spouse) for when you can claim Social Security. Here’s a breakdown:

• Before full retirement age: At the earliest, you can claim Social Security at age 62. But doing so would reduce your benefit by 25-30%. That sacrifice would add up to thousands of dollars per year of forfeited income. The reduction would be 5-6.7% less with each year closer to your FRA.
• At full retirement age: Once you reach your FRA (66-67), you qualify for 100% of your calculated benefit amount.
• Up to age 70: You can also choose to delay taking Social Security up to several years after your FRA, which will increase your monthly benefit by 8% for each year you wait. If you wait until the maximum age of 70, your monthly payment would be up to 77% higher than if you claimed benefits at age 62, amounting to a huge difference over the course of your retirement.

To sum it up, claiming Social Security is a trade-off: get less money earlier, or get more money later. The right choice for you will depend on a mix of factors, which we’ll discuss next.

Key Considerations for When to Claim Social Security

Let’s be clear: Choosing when to start receiving Social Security benefits is—for most people—not a quick and easy process. To make a smart decision, you’ll need to think carefully about how much extra income you’ll need in retirement, and for how long. Start by retirement planning sooner than later, and ask yourself important financial questions. The list of potential variables is endless, but here are some of the most important considerations on which to base your final decision:

• Your lifestyle and income needs in retirement: To understand how much you’ll need to rely on Social Security, you must first have a clear picture of your budget in retirement. This will include core expenses like housing, food, insurance and healthcare, as well as discretionary spending on leisure activities, dining out, and travel. While it’s impossible to predict every expense for the next 20-30 years, you can arrive at a realistic estimate of how much monthly income you’ll require.
• Your financial resources: Without sufficient savings or pension income, you may need help from Social Security as soon as you can get it. Conversely, if you’ve built a substantial retirement fund and investment portfolio to sustain your lifestyle in retirement, waiting to receive the maximum Social Security benefit might make the most sense.
• Your health and family history: In general, people are living longer and healthier lives compared to decades ago. That’s a good thing, but it also raises concerns about outliving your savings. If you anticipate living into your 80s or 90s, waiting to collect Social Security can provide more financial stability in your old age. But if you have serious health issues and/or a family history of dying young, claiming earlier would allow you to enjoy the extra income while you still have the chance.
• Your plans to keep working (or not): You can continue to work while collecting Social Security benefits, but your payments may be reduced as long you’re earning over a certain limit at your job (the numbers are different depending on whether you’ve reached FRA; see here for details). This can complicate cash flow and tax planning, another reason to consider waiting to claim benefits if you can.
• Your marital status: Marriage (and divorce) introduces even more complexity in planning for Social Security benefits. One thing to consider is that you may be eligible for spousal benefits (up to 50% of your spouse’s benefit amount) if that number is higher than your own calculated benefit. Divorcees can also claim spousal benefits if they were married for 10 years (plus some other stipulations). Either situation could impact your decision on when to collect. For example, a common strategy is for spouses to strategically coordinate the timing of their payouts, with one spouse taking Social Security early while the other waits until FRA or beyond, creating a “best of both worlds” approach.
• Your status as a surviving spouse: If your spouse or ex-spouse has passed away and you meet the requirements, you can receive up to 100% of your late spouse’s Social Security income. You can start collecting survivor benefits as early as age 60. However, as with regular retiree benefits, the payment is reduced for each year you claim before your FRA. Unlike regular retiree benefits, survivor benefits do not increase after your FRA, so there is no advantage to waiting longer to claim.

Whatever You Do, Don’t Just Guess

Ultimately, choosing when to take Social Security is about balancing immediate needs with long-term income optimization. With so many factors in play, timing your benefits is an extremely personalized—and often complicated—decision. Approaching it carelessly could be a mistake you’ll regret for many years. To make sure you’re considering every angle, seek the guidance of a professional financial advisor. A qualified advisor with in-depth knowledge of the rules can help you analyze your needs and create a seamless, tax-efficient plan to coordinate Social Security benefits with your investment portfolio.

At Quotient Wealth Partners, we help clients determine important financial decisions that best suit their needs. Knowing you’ve made a fully informed decision, you can move through retirement with greater peace of mind. Contact us today to schedule a complimentary financial plan—we’re here to help!