The future of Social Security is a hot topic, with concerns about its financial stability making headlines. By 2034, if no changes are made, Social Security will only be able to pay about 78% of scheduled benefits. Understandably, many retirees are worried—30% of people claim Social Security early, fearing it will run out.
But is Social Security really on the verge of collapse?
No, says financial expert Larry. While changes may come, Social Security isn’t going anywhere. The key is having a plan that ensures you get the most out of your benefits.
Here are four essential strategies to help you maximize your Social Security and secure your retirement income.
1. Maximize When You Claim Social Security
One of retirement’s most important decisions is when to start collecting Social Security. If you claim as soon as you’re eligible (at age 62), you lock in a permanently reduced benefit—up to 30% less than if you had waited until full retirement age (FRA).
Why waiting makes sense:
- Every year you delay, your benefits increase by about 8% until age 70.
- That higher amount also receives cost-of-living adjustments (COLA), meaning your lifetime income could be tens of thousands—or even hundreds of thousands—higher.
If you’re unsure of the best time to claim, consult with a financial expert who can help coordinate your Social Security strategy with your overall retirement plan.
2. Don’t Rely Solely on Social Security—Diversify Your Income
Social Security was never meant to be the sole source of retirement income. With potential benefit cuts looming, relying too heavily on Social Security could put your financial future at risk.
Build multiple income streams:
- Tax-free income sources like Roth IRAs.
- Annuities that provide guaranteed lifetime payments.
- Investment income from dividends or real estate.
Diversifying ensures that your financial security remains intact if Social Security benefits change.
Larry’s advice: We call these the “red zone” of retirement—the last few years before you retire. This is the time to start strategically shifting your assets to prepare for a stable income in retirement.
3. Create Tax-Free Income to Protect Your Social Security
Many retirees don’t realize that Social Security itself isn’t taxable, but when you add in other income, a portion of your benefits may become taxable. This is due to something called provisional income, which includes:
- Half of your Social Security benefits.
- Withdrawals from 401(k)s, IRAs, and pensions.
- Taxable interest or dividends.
The solution? Tax-free income sources. By shifting money into tax-free accounts like a Roth IRA, you can avoid pushing your Social Security into taxable territory.
Larry’s insight: Most retirees worry too much about “Will Social Security still be there?” when they should ask, “How much of my Social Security will I lose to taxes?”
4. Have a Smart Tax Plan for Retirement
Without proper tax planning, you could pay far more in taxes than necessary during retirement. Managing your tax strategy is just as important as deciding when to claim Social Security.
Key tax-saving moves:
- Roth conversions—Shift money from taxable IRAs into tax-free Roth accounts while tax rates are historically low.
- Strategic withdrawals—Mix withdrawals from taxable and tax-free accounts to stay in a lower bracket.
- Annuities—These can provide tax-advantaged income while reducing reliance on Social Security.
Larry’s advice: Don’t take Social Security early because you’re worried about its future. The more significant issue is ensuring your Social Security benefits aren’t eaten up by taxes.
Final Thoughts: Plan Now for a More Secure Retirement
Social Security may face changes, but it isn’t disappearing. The key to financial security in retirement is having a plan that accounts for when to claim benefits, how to reduce taxes, and where to create additional income.
Have questions? Call 615-216-1048 or visit sfawealth.com to start creating your personalized retirement strategy today.
By making smart choices now, you can maximize your Social Security benefits and enjoy a stress-free retirement—no matter what happens in Washington.