AFL’s JoAnne Reilly
Social Security income is an important discussion to have with your financial advisor before you stop working.
Below are commonly asked questions and answers to help you prepare for the conversation.
1. When should I collect Social Security benefits?
The answer is different for every individual, as it depends on several personal factors. Here are the general milestones:
- You can collect Social Security retirement benefits as early as age 62, at a reduced level.
- If you wait until your full retirement age, as defined by the Social Security Administration, you will receive your full benefit amount.
- The retirement benefit amount increases each year if you wait beyond full retirement age (up to age 70) to start collecting.
Waiting for a larger benefit may not be right for everyone. Your financial advisor can help you evaluate options based on your financial situation and goals. For example, they may consider:
- Varying tax rates on Social Security income
- Capital gains and IRA withdrawals
- Health issues
- Life expectancy in your family history
2. What is my full retirement age (FRA)?
The year and month you reach full retirement age depends on the year you were born.
Year of birth |
Full retirement age |
| 1943-1954 | 66 years old |
| 1955 | 66 + 2 months |
| 1956 | 66 + 4 months |
| 1957 | 66 + 6 months |
| 1958 | 66 + 8 months |
| 1959 | 66 + 10 months |
| 1960+ | 67 years old |
Source: https://www.ssa.gov/benefits/retirement/planner/agereduction.html
3. Can I change my mind later?
If your circumstances have changed, there are a couple of options available to you.
You have up to 12 months to withdraw your Social Security application if you change your mind. If you received benefits, you are required to repay them.
After your reach your FRA, you can also suspend your retirement benefits for a period of time before restarting them later for a higher benefit payment. Suspended benefits will automatically start again at age 70.1
4. Can I work and collect Social Security retirement benefits?
Yes, you can work while collecting Social Security retirement benefits. Here are key considerations:
- Younger than FRA for the entire year: Your benefits are reduced for earnings above an annual limit ($18,960 in 2021).
- Younger than FRA for part of the year: In 2021, benefits are reduced $1 for every $3 you earn above $50,520. Earnings are counted up to the month before your FRA.
- FRA and older: Beginning with the month you reach full retirement age, your earnings no longer reduce your benefits — no matter how much you earn.
If you’re self-employed, only your net earnings count toward reduced benefits. The Social Security Administration does not count income from government/military benefits, pensions, annuities, capital gains, investment income or interest.
5. What is the financial status of the Social Security program?
If you are in or nearing retirement, Social Security solvency is not likely to materially affect you.
The Social Security Board of Trustees forecasts that as currently structured, financial reserves should be able to pay full benefits until 2034, decreasing to 76% of their prior level of benefits after that time.2
Potential changes to Social Security eligibility could address the shortfall — but any changes to the program would likely be gradual and phased in over time. Ameriprise monitors new developments that may impact eligibility or benefits.
6. Is inflation factored into Social Security?
The Social Security Administration can enact yearly benefit increases called cost-of-living adjustments (COLA) based on inflation. The cost of living adjustment for 2021 is 1.3%.3 Since 1975, COLAs have ranged from 14.3% (1980) to 0.0% (2009, 2010, 2015).
Ask your advisor about your Social Security options
Social Security can be a useful source of retirement income that you cannot outlive — regardless of when you choose to begin taking benefits. Unlike some other income streams, it has the backing of the federal government and is protected against inflation.
Work with your advisor to make smart decisions about your retirement income. In general:
- Five years ahead of your estimated retirement date is a good time to plan your Social Security income strategy.
- One year out from retirement, decide when you expect to begin claiming benefits. If you have not done any prior Social Security planning, now is a critical time to do it.
