Most People Claim Social Security at the Wrong Age: How to Choose the Right Strategy for Your Retirement

Should Social Security’s 2032 Funding Problem Change When You Claim?

There is a legitimate reason Social Security is getting more attention right now.

The 2026 Social Security Trustees Report projects that the Old-Age and Survivors Insurance Trust Fund—the portion primarily responsible for retirement and survivor benefits—will be able to pay full scheduled benefits until the fourth quarter of 2032.

If Congress made no changes before then, continuing program income is currently projected to cover approximately 78% of scheduled OASI benefits at the time the reserves are depleted.

That is a real financial issue for the Social Security system.

But it does not mean Social Security suddenly disappears in 2032.

And it certainly does not mean every person in their 50s or 60s should rush out and claim benefits as quickly as possible.

In fact, making an early claiming decision primarily because you are worried about Social Security’s finances could potentially create a different risk inside your retirement plan: permanently locking in a lower monthly benefit when that lifetime income may become increasingly important as you age.

Nobody knows exactly what Congress will eventually do.

So rather than attempting to predict Washington, I believe retirees should focus on something we can analyze much more effectively:

How does each Social Security claiming strategy affect the probability that your retirement plan succeeds?

That is the question I care about.

There Is an Important Lesson From the 1983 Social Security Crisis

Today’s Social Security funding problem is serious, but it is not the first time the program has faced a significant financial challenge.

In the early 1980s, Social Security was dealing with an immediate financing crisis. Congress ultimately passed the Social Security Amendments of 1983, signed by President Reagan.

Those amendments made a number of significant changes to the system, including changes to Social Security taxation, payroll taxes, delayed retirement credits, and the gradual increase in full retirement age.

But there is an important historical detail.

The increase in full retirement age was phased in. Individuals born before 1938 continued to have a full retirement age of 65, while the higher retirement ages began with people born in 1938 and later.

I would not interpret that history as a guarantee that Congress will handle the next Social Security reform the same way.

It is not a guarantee.

But it is useful context.

Major retirement-policy changes can be phased in over many years, and that is one reason I do not believe a retiree should make a permanent claiming decision today based solely on predictions about what Congress might do tomorrow.

Build the plan around the rules we know, test reasonable alternatives, and continue monitoring the plan as the law evolves.

Research Suggests Many Americans May Be Claiming Social Security Too Early

There is also substantial research suggesting that many Americans are not optimizing their Social Security claiming decisions.

One National Bureau of Economic Research study examined workers ages 45 through 62 using a life-cycle financial model that incorporated Social Security as well as major federal and state tax and benefit programs.

The researchers concluded that more than 90% of the workers analyzed should have waited until age 70 to claim Social Security, while only 10.2% appeared to do so.

That does not mean everyone should wait until 70.

There are absolutely situations where claiming at 62, 63, 65, full retirement age, or another age can make sense.

Poor health can change the analysis.

Spousal and survivor benefits can change it.

Employment can change it.

Taxes can change it.

Your investment assets, pension income, spending needs, and other guaranteed income can change it.

That is precisely the point.

There is no universally correct Social Security claiming age.

But there is a better way to make the decision.

Social Security Is a “Red-Light” Retirement Decision

I often explain this using a golf analogy.

There are some shots in golf where you can be aggressive.

You have plenty of room around the green. If the ball goes a little short, you are fine. If it goes a little long, you are still fine.

I call that a green-light shot.

Some retirement planning decisions can look similar.

If we model a strategy and discover that several different outcomes all leave the retiree in a strong financial position, we may be comfortable planning around what we believe is the most likely outcome.

But then there are red-light shots.

Water is guarding the green.

Now the consequences of being wrong are very different.

You don’t simply ask, “What outcome is most likely?”

You also ask:

“What happens if I am wrong?”

I think Social Security frequently belongs in this second category.

Suppose a healthy married couple assumes they probably will not live into their 90s and claims Social Security early.

They might be right.

But what if they are wrong?

If one spouse lives much longer than expected, that household may need retirement income for three decades or more.

That is when the decision to permanently reduce lifetime Social Security income can become much more consequential.

This is why Social Security planning should not simply be about maximizing the number of checks you receive from Uncle Sam.

It should be about managing longevity risk and increasing the probability that your retirement income lasts as long as you do.

A Real Retirement Planning Example

In the video, I walk through an example from our retirement planning work involving a couple who were both approximately 64 years old and about 30 days from retirement.

They were about to go from approximately $200,000 of annual earned income to essentially no employment income.

Understandably, that felt uncomfortable.

Their instinct was to retire and immediately begin collecting Social Security.

So rather than simply telling them, “Wait until this age,” we modeled the alternatives.

We looked at what happened if they died relatively early.

We looked at what happened around their Social Security break-even age.

And most importantly, we looked at what happened if they lived a very long time.

Under their originally intended Social Security strategy, the plan showed an estimated 41% probability of retirement success.

Under the Social Security claiming strategy we recommended, the estimated probability increased to 79%.

Then we stopped looking at Social Security in isolation.

We coordinated the claiming strategy with the other parts of their retirement plan—including income planning, investment planning, Roth and tax strategy, Medicare considerations, and estate planning.

Under the complete planning scenario presented in the video, the estimated probability of retirement success increased to 91%.

Those figures were specific to that particular planning analysis and its assumptions. They are not guarantees, and another retiree’s results could look very different.

But the example illustrates why I believe Social Security needs to be evaluated inside the retirement plan rather than separately from it.

Why I Don’t Like Using “Break-Even Age” as the Main Social Security Decision

A lot of Social Security conversations eventually turn into a discussion about break-even age.

“If I wait until 70 instead of taking Social Security at 62, how old do I have to live before waiting pays off?”

Mathematically, that is a perfectly reasonable calculation.

I simply don’t believe it answers the most important retirement planning question.

A traditional break-even calculation generally focuses on cumulative Social Security benefits.

But your retirement doesn’t happen inside a Social Security calculator.

Your retirement happens inside a household balance sheet.

If you delay Social Security, where does your income come from in the meantime?

Do you withdraw from a taxable account?

Do you take distributions from an IRA?

Does delaying Social Security create an opportunity for Roth conversions?

How will those decisions affect future RMDs?

How much of your Social Security may eventually become taxable?

Could higher income create Medicare IRMAA surcharges?

What happens to the surviving spouse?

What happens if markets perform poorly during your first several years of retirement?

And what happens if you live substantially longer than expected?

Those questions are largely invisible in a simple Social Security break-even calculation.

For a retiree with $1 million, $2 million, $3 million or more accumulated across retirement and investment accounts, these interactions can matter far more than the break-even date itself.

Social Security and Retirement Tax Planning Are Connected

This is an area where retirement tax planning becomes especially important.

Many retirees enter retirement with a large portion of their wealth inside a traditional IRA or 401(k).

They may retire at 62, 63, 64 or 65.

Then several years may pass before Social Security begins and before Required Minimum Distributions become a major part of the tax picture.

Those years can sometimes create a valuable tax-planning window.

Depending on the retiree’s circumstances, it may be possible to intentionally recognize income, complete Roth conversions, reposition assets, or coordinate withdrawals before Social Security and RMDs begin stacking on top of one another.

But there is no automatic rule saying, “Delay Social Security and do Roth conversions.”

A Roth conversion creates taxable income.

That income can affect Medicare premiums.

It may affect other parts of the tax return.

And the long-term value of the conversion depends on future tax rates, longevity, investment growth, estate goals, beneficiary tax rates, and many other variables.

That is why I believe Social Security strategy and Roth conversion strategy should be modeled together rather than decided independently.

For retirees with significant pretax savings, this coordination can be an important part of a comprehensive retirement tax plan.

Retirement Date Does Not Equal Social Security Date

If there is one idea I would want someone nearing retirement to remember from this article, it is this:

Retirement date ≠ Social Security claiming date.

They may happen at the same time.

But they do not have to.

Retirement is primarily an employment decision.

Social Security is a lifetime-income decision.

Those decisions affect one another, but they should not automatically be combined.

The better approach is to determine what combination of Social Security, portfolio withdrawals, taxable income, Roth conversions, pensions, and other income sources gives you the strongest overall retirement plan.

That requires more than selecting investments.

It requires retirement income planning.

It requires retirement tax planning.

And it requires someone to look at how all the moving pieces interact over the next 20, 30, or potentially 40 years.

What Should a Good Social Security Analysis Actually Answer?

A meaningful Social Security analysis should help you understand whether claiming earlier or later improves the sustainability of your retirement income, how the decision changes portfolio withdrawals, how it interacts with your IRA and 401(k) tax strategy, whether it creates or eliminates Roth conversion opportunities, how it affects the surviving spouse, and what happens under both shorter- and longer-than-expected lifespans.

It should also examine the tax consequences rather than focusing exclusively on the gross Social Security benefit.

And perhaps most importantly, it should show you the tradeoffs.

Sometimes delaying Social Security will look better.

Sometimes it won’t.

A good retirement plan should not begin with the answer.

It should begin with the analysis.

Social Security Is Only One Piece of the Retirement Puzzle

At Cyr Financial, this is why we approach retirement planning as an integrated process through our AIM Retirement System™.

Social Security matters.

But so do retirement income, investments, taxes, Roth conversions, RMDs, Medicare and IRMAA, estate planning, and the financial needs of a surviving spouse.

Changing one can affect several of the others.

That is also why I think of my role as a Retirement Tax Architect.

As a CPA and CFP®, I am not interested only in asking, “How much money have you accumulated?”

I also want retirees to understand:

How much of that wealth may actually be theirs to keep after taxes—and how can all of the pieces be coordinated to improve the overall retirement plan?

For someone nearing retirement with seven figures in an IRA, 401(k), or other investment accounts, that coordination can become increasingly important.

Your investment portfolio is only one part of your retirement.

The goal is to build the pieces around it into one comprehensive plan.

Before You Claim Social Security, Look at the Entire Plan

There is no single “best” Social Security claiming age for everyone.

And that is exactly why I would be cautious about any article, calculator, or advisor that gives you an answer before understanding the rest of your retirement.

Claiming Social Security is a permanent decision with implications that can last for decades.

Don’t make it just because you retired.

Don’t make it just because you reached a certain birthday.

And don’t make it simply because a break-even calculator told you one age looked better than another.

Make the decision that fits your retirement plan.

If you are approaching retirement and would like a second look at how Social Security, taxes, Roth conversions, retirement income, investments, Medicare, and estate planning fit together, our AIM Assessment is designed to help identify the major risks and planning opportunities in your current retirement strategy.

You can learn more here:

https://cyrfinancial.net/aimassessment/

The goal isn’t to predict every detail of the next 30 years.

It’s to build a retirement plan that is prepared for more than one outcome.