Navigating Social Security can feel like decoding a secret language — abounding acronyms, age thresholds, and benefit formulas. To navigate and sort through this confusing topic, we partnered with consultant Elaine Simmons to provide valuable insight during our September webinar. Elaine is a seasoned expert with 34 years at the Social Security Administration and 16 years and counting as a private consultant.

Showcasing her deep industry experiences, practical insight, and witty delivery, Elaine quickly dove into some of Social Security’s most misunderstood concepts. She encourages people to think of Social Security not just as a government program, but as a strategic investment and a form of asset diversification within their overall financial picture.

With deep knowledge, engaging humor, and appropriate tact, Elaine provided example after example to cover a breadth of topics. Highlighted here are a few specific concepts:

• Beginning Benefits – Most people wonder when to begin taking Social Security benefits. By rule of thumb, the primary insurance amount (PIA) grows by approximately 6% per year between age 62 and full retirement age (FRA), plus cost-of-living adjustments (COLAs). From FRA to age 70, the growth jumps to about 8% annually, again with COLAs.
• Coordinating Benefits – Building on the previous idea, a delay can significantly boost monthly income — especially for the higher earner in a couple — ensuring the surviving spouse receives the largest possible inflation-adjusted benefit. For example, a maximum age 70 benefit nearing $5,100 per month translates to over $60,000 annually for a surviving spouse. Elaine also walked through real-life scenarios to illustrate how couples might coordinate their benefit start dates. One example involved a high-income husband and a wife who claimed Social Security early at age 62, only to face a steep marginal tax rate on her benefits. Another scenario highlighted the little-known option to withdraw an early application, repay the benefits within 12 months, and reapply later for a more optimal outcome. Elaine emphasized that spousal benefits are based on 50% of the other spouse’s FRA benefit — not their delayed retirement credits, which is a common point of confusion.
• Survivor Benefits – Distinctly different from spousal benefits, survivor benefits can be claimed as early as age 60, though benefits are reduced if taken before Full Retirement Age. Importantly, survivors can switch between their own benefit and the survivor benefit to maximize income. A minimum nine-month marriage duration is typically required, though exceptions exist in cases of accidents. Divorced widows may also qualify if the marriage lasted at least 10 years and other criteria are met.
• Divorce – A person was married for at least 10 years, divorced for two or more years, and are not currently remarried, may be eligible to claim benefits based on their ex-spouse’s record — even if the ex-spouse has not filed for Social Security yet. This can be a valuable option for those navigating retirement after a long-term marriage.
• Special Needs and Disabled Children – If a child is disabled before age 22, they may be eligible for up to 50% of a living parent’s PIA or 75% if the parent is deceased. Families with special needs children face complex rules, so it is strongly recommended to receive professional consultation.
• Policy Updates –  The repeal of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) as of January 2024 are major policy changes. These rules previously reduced Social Security and spousal/survivor benefits for individuals with non-covered pensions, and their repeal marks a significant change for affected retirees. Most people who benefited from this change are already aware.
• Medicare Pitfalls– It is important to beware of situations that can impact Medicare costs. For those contributing to Health Savings Accounts (HSAs), retroactive enrollment in Medicare Part A at age 65 can invalidate months of HSA contributions. Additionally, Medicare Part B premiums may increase under the Income-Related Monthly Adjustment Amount (IRMAA), which is based on income from two years prior.

Naturally, the question of solvency is on many people’s minds regarding Social Security. Will the program last into the future? Elaine acknowledged concerns but reminded attendees that Social Security has undergone major reforms before — notably in 1983 via the Greenspan Commission. Out of necessity, it is due for changes again. But this does not mean the program will disappear. Drawing from her long history in the industry, she outlined potential policy solutions such as adjusting the payroll tax rate, modifying benefit formulas, or increasing the number of quarters required for coverage. Once the Social Security Trust Fund is depleted, Social Security cannot legally distribute more than it receives. As such, people of all ages are encouraged to adjust expectations accordingly.

Reasonably, a successful financial plan does have to rely on Social Security income. The benefit can instead become an enjoyable addition to retirees’ finances. Our team at MarsJewett endeavors to help people reach this kind of financial independence – freed from financial worry, and free to enjoy each day. If we can help your friends and loved ones, it is our honor. Together, we can navigate the challenges and triumphs of an unknown and exciting future. We delight in journeying with you.

Disclosure:

The information provided herein is for educational and informational purposes only and should not be construed as investment, tax, or legal advice. Social Security rules and related laws are complex and subject to change; the examples provided are for illustrative purposes only and may not apply to your individual circumstances. Individuals should consult with the Social Security Administration and/or a qualified financial professional before making any decisions regarding claiming strategies or retirement planning. For additional information about MarsJewett Financial Group, including our services and disclosures, please refer to our Form ADV, available upon request or by visiting the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov