If you’ve been earning more than $250,000 annually, your financial plan probably doesn’t hinge on the future of Social Security. However, if you’re over 60 and contemplating retirement, you probably have questions about how to maximize your benefits—especially as of late. The sustainability of the Social Security trust fund reserves is in question; some Republicans are openly discussing cuts to the entitlement program; and legislative changes, such as the recent passage of the Social Security Fairness Act, have thrust the 90-year-old system into the headlines.  

There’s good reason to pay attention. Since you’ve been paying into the system for years, there may be more of your money at stake than you realize. For example, someone who’s earned $250,000 annually for 35 years could have Social Security benefits on the table worth $840,000 or more. Additionally, taking a strategic approach to your benefits can make an appreciable difference to your overall financial strategy, enhancing your cash flow and reducing reliance on other assets.  

Should You Claim Benefits Before Social Security “Disappears”?  

Before we discuss how to maximize your benefits, let’s get one thing straight: Social Security is unlikely to disappear. Even though the trust fund reserves are projected to run dry in 2035, most funding for paying out benefits comes from the Federal Insurance Contributions Act (FICA) taxes. So, even if the trust fund reserves are depleted, this does not mean that Social Security retirement benefits would suddenly cease to exist. Instead, even if no laws were passed to remedy the situation, the system could continue to pay 83% of the ongoing scheduled benefits in 2035. By 2098, this figure would decline to about 73%.  

There are other reasons why lawmakers will probably enact measures that would allow the system to continue paying out full benefits for decades to come. Why? According to a recent Gallup report, 58% of Americans say Social Security is a “major source” of their income. And since most working Americans contribute 6.2% of their earnings to Social Security (a rate matched by their employers), eliminating the benefit would be politically difficult if not completely untenable. Instead, lawmakers will likely consider some simple solutions to solve the funding gap, including:  

  • Enacting a permanent increase in FICA taxes of 3.33%, bringing the Social Security portion of FICA taxes to 15.73%.  
  • Decreasing current and scheduled benefits set to be paid out by 20.8% through 2098.  
  • Maintaining current benefit levels for current Social Security recipients but cutting future recipients’ benefits by 24.8% (those eligible in 2024 or later).  
  • Raising the Full Retirement Age to 68 or 69; potentially indexing it for longevity.  
  • Slowing benefit growth for top earners.  
  • Changing the index for the cost-of-living adjustments to CPI-E (inflation faced, specifically to seniors). 
  • Some combination of the above. 

Finally, Social Security is intertwined with Medicare, which faces similar funding challenges. Lawmakers can’t realistically eliminate one without the other. With so many Americans relying on these entitlements, they’ll likely fund a solution that addresses both. 

When Should You Claim Benefits?   

For every year past Full Retirement Age (FRA) that you delay your Social Security benefits, your monthly payments increase by up to 8% (until age 70). This delay is a form of guaranteed income growth unmatched by most low-risk investments. But that doesn’t make the decision to delay a slam dunk.  

If you retire and forego claiming Social Security for a few years, you will need to draw funds from investments and savings. Since Social Security benefits can only be transferred to a surviving eligible spouse, you might be unintentionally diminishing the funds available or to be inherited by other family members, charitable organizations, or estate planning goals. Additionally, if the future does bring lower Social Security payouts, the numbers might not add up as planned.  

Example 1: For a retired, previously high-income earner eligible for $3,500 monthly at FRA (age 67 in our example), waiting until age 70 could increase the benefit to approximately $4,600 per month. Over 20 years, the total difference exceeds $250,000 in additional income. This may be a lucrative strategy if pensions or other income sources meet all income needs.  

Example 2: Same scenario as above, but, no large pension or other income source, therefore delaying benefits would necessitate withdrawing an additional $3,500 monthly over the three-year timeframe from investments for a total of $126,000. If that same $126,000 had remained invested, growing at an annual rate of 7% over 20 years (estimated life expectancy) with no additional contributions, it would increase to approximately $487,580.  

So, when should you claim benefits? The answer depends on your specific circumstances and goals. A financial advisor can help you figure out what makes the most sense.  

Other Tips for Maximizing Benefits 

When to claim your benefits is just one factor in optimizing them. Here are a few other tips: 

Consider the tax implications: Social Security benefits can be taxed at up to 85% at ordinary tax rates. Under current regulations, that means 15% or more could be tax free, depending on income thresholds. Here’s how you can make your retirement income stream more tax efficient.  

  • Diversify income sources: Combine Social Security with investment withdrawals from Roth IRAs or other tax-advantaged accounts to stay below taxable income limits. This may also help offset Medicare IRMAA surcharges as well.  
  • Leverage charitable giving: Donations made directly from IRAs, up to the IRS 2025 limit of $108,000 (minimum age of 70 ½), may help reduce taxable income, indirectly shielding Social Security benefits from higher taxation. You can also use Social Security income to fund charitable remainder trusts (CRTs), which provide tax advantages and income streams while benefiting causes aligned with your values. 

Coordinate with your spouse: For wealthy couples with different incomes, coordinated claiming strategies can optimize Social Security benefits: 

  • The higher earner could delay benefits until age 70 to lock in the highest possible payout. 
  • The lower-earning spouse may claim benefits earlier to bring in income while preserving other investments.  
  • Survivor benefits are maximized when the higher earner delays retirement, ensuring the surviving spouse receives the maximum payout for life. 

Employ Roth conversion strategies: Convert traditional IRA funds to Roth accounts during lower-income years to reduce future RMDs and taxable income and allow potentially more advantageous inheritance for heirs due to the latest required minimum distribution laws set forth by the Secure Act 2.0.  
 

Next Steps 

Maximizing Social Security benefits isn’t just about increasing monthly income—it’s a strategy for preserving and growing wealth. To ensure you enjoy the full measure of this entitlement, we suggest you consult a Cerity Partners Wealth Advisor to design a personalized strategy. Then, revisit the plan regularly to account for changes in tax laws, market conditions, and personal circumstances. 

Please read important disclosures here.