Social Security
Definition
A federal program that provides retirement income, disability benefits, and survivor benefits funded through payroll taxes. Most workers become eligible for retirement benefits at age 62.
Social Security is the largest source of retirement income for most Americans. Funded through payroll taxes (6.2% from employees and 6.2% from employers on income up to $168,600 in 2025), the program provides monthly benefits based on your highest 35 years of earnings.
You can claim Social Security retirement benefits as early as age 62, at full retirement age (66-67 depending on birth year), or delay until age 70. Claiming early permanently reduces your monthly benefit by up to 30%. Delaying past full retirement age increases benefits by 8% per year until age 70 — a guaranteed 8% annual return that's hard to beat.
The decision of when to claim is one of the most impactful retirement planning choices. For someone whose full retirement age benefit is $2,000/month: claiming at 62 gives ~$1,400/month, while waiting until 70 gives ~$2,480/month. The break-even age (where total benefits from waiting exceed total benefits from claiming early) is typically around age 80.
Spousal and survivor benefits add complexity. A spouse can claim up to 50% of the higher earner's benefit. A surviving spouse can claim 100% of the deceased spouse's benefit. These rules create important claiming strategies for married couples, especially those with unequal earnings histories.
Social Security's long-term solvency is a concern — the trust fund is projected to be depleted around 2035, which would result in automatic benefit cuts of approximately 20% unless Congress acts. However, Social Security has been reformed multiple times in its history, and eliminating benefits entirely is politically unlikely.
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Frequently Asked Questions
Should I claim Social Security at 62 or wait?
If you're healthy and have other income sources, waiting until 70 maximizes lifetime benefits. Each year you delay past 62 permanently increases your monthly benefit. However, if you need the income, have health concerns, or have a shorter life expectancy, claiming earlier may make sense.
Will Social Security still be there when I retire?
Social Security will almost certainly exist but may be modified. Even if the trust fund is depleted, ongoing payroll taxes would cover about 80% of benefits. Congress has strong political incentive to prevent cuts. However, planning conservatively (not relying solely on Social Security) is wise.