What to Know About Social Security Now and in Retirement

Social Security provides nearly 97% of older adults with a foundation of retirement protection in their later years. For many, it serves as a major source of income, supplementing 40% of their pre-retirement earnings or providing disability or survivor benefits for eligible individuals. For others, it’s a spoke in a broader retirement strategy, one of several income streams drawn from diversified resources accumulated over years of working, including 401(k)s, pensions, IRAs, and rental property investments.

With so many moving parts, understanding the rules and mechanics behind Social Security is essential to determine its place and timing within an overarching retirement strategy.

Following are some important areas to consider. 

How Do You Earn Credits for Social Security?

To qualify for Social Security retirement benefits, individuals must have contributed to the system for at least 10 years, which is equivalent to a total of 40 credits (four per year). Each year, the amount required to earn one work credit adjusts to align with increases in average earnings. In 2025, one credit is issued for every $1,810 earned, up to a total of $7,240.

When it comes time to claim Social Security, the administration will calculate a monthly lifetime payment by averaging the 35 highest years of indexed earnings. Timing is important, as the age when benefits begin will also affect the amount received. Early claims reduce monthly payments, whereas delayed claims enhance them.

What Age Can You Claim Social Security?

Individuals can start receiving Social Security benefits as early as age 62. However, this age only marks the beginning of eligibility for Social Security; it doesn’t consider an individual’s “full retirement age” (FRA). Full benefits become available according to their birth year, as follows:

• 1943 – 1954 – FRA is age 66
• 1955 – 1959 – FRA is age 66, plus two months for each consecutive year
• 1960 or later – FRA is age 67

Delaying Social Security benefits beyond FRA up until age of 70 results in higher monthly payments. However, increases will stop at age 70, so there is no financial advantage to postponing benefits past this point. 

Can You Work and Claim Social Security Benefits at the Same Time?

With individuals increasingly working later in life, questions often arise whether income can be combined with Social Security benefits. The short answer is yes; however, there are rules and limits around earnings, as outlined below.

Claiming Social Security Before Full Retirement Age

In 2025, the Social Security earnings limit is $23,400 annually ($1,950 monthly) if an individual wants to both earn money from a job while also collecting benefits before their FRA. For every $2 earned above the income limit, $1 will be withheld from the monthly benefit.

Claiming Social Security in the Year of Full Retirement Age

During the year an individual reaches FRA, the rules are more generous, with a higher earnings limit of $62,160 annually ($5,180 monthly) in 2025. For every $3 earned above the income limit, $1 will be deducted from the benefits amount.

Claiming Social Security After Full Retirement Age

Waiting to claim Social Security benefits after FRA has been reached removes any limits around earnings. Individuals can work well past retirement age and earn as much as they want without Social Security income being affected. 

When Should You Apply for Social Security Benefits?

After determining the most optimal age to start claiming Social Security benefits—anytime between the ages of 62 and 70—individuals should apply for benefits four months before their desired start date. 

Once retirees reach full retirement age, their Social Security benefits increase by 8% for each year they delay claiming, up to age 70. If benefits are not claimed by age 70, individuals can start at any time thereafter; however, they will not receive any pay back for the months delayed beyond age 70.

Social Security benefits will be paid electronically, so be sure to provide banking information for direct deposit or opt for a prepaid debit card. 

When Should You Apply for Medicare?

Medicare is handled separately from Social Security and generally follows its own application timeline for benefits. Individuals aged 65 and older are eligible to receive Medicare, a federal health insurance program providing benefits to individuals based on age, disability, or qualifying medical condition.

There are three enrollment periods for Medicare, including:

• Initial Enrollment Period: Begins three months before 65th birthday and lasts for seven months.
• Special Enrollment Period: Starts at any time while working and covered by a group health plan, within 8 months of stopping work, or within 8 months after a group health plan ends while continuing to work.
• General Enrollment Period: Spans Jan. 1 – Mar. 31 each year after the initial and special enrollment periods and will likely include late penalties. 

If healthcare coverage is provided by an employer and a Health Savings Account (HSA) is active, individuals may consider delaying Medicare enrollment until the HSA account is fully utilized, as enrollment in any part of Medicare disqualifies individuals from making further HSA contributions. It’s important to note that coverage for Medicare Part A will go back retroactively up to 6 months from the time of enrollment, so plan contributions accordingly.

Also, individuals with higher income levels may be required to pay an Income-Related Monthly Adjustment Amount (IRMAA), which is a surcharge on Medicare Part B (medical insurance) and Medicare Part D (prescription drug coverage). For 2025, Medicare beneficiaries with a modified adjusted gross income above $106,000 ($212,000 married filing jointly) will be subject to these adjustments. 

How is Social Security Taxed?

Social Security doesn’t have its own separate tax. Rather, it’s taxed based on total provisional income, which is calculated by adding adjusted gross income, any tax exempt interest, and half of Social Security benefits. The following shows how much may be taxable based on provisional income:

• 0% if below $25,000 (single) or $32,000 (married).
• Up to 50% between $25,000–$34,000 (single) or $32,000–$44,000 (married).
• Up to 85% above $34,000 (single) or $44,000 (married).

The One Big Beautiful Bill Act (OBBBA) did not change any of these thresholds or percentages; however, it did introduce a new temporary deduction starting in 2025 through 2028. Retirees age 65 and older can deduct up to $6,000 ($12,000 married filing jointly), with the deduction phasing out above $75,000 of modified adjusted gross income ($150,000 for married filing jointly) and eliminated entirely once income exceeds $175,000 ($250,000 for married filing jointly). 

Preparing for Retirement

This is a good time to speak with your advisor and financial planner to review how Social Security fits into your broader retirement income plan. By managing benefits alongside other income sources, you may be able to avoid higher marginal tax rates and create a tax-efficient withdrawal strategy that helps maximize after-tax income in retirement.

As you prepare for retirement, take the time to consider your options before making any final decisions. Have a conversation with your R&A advisor to figure out the best time to start Social Security and how it fits into your larger plan.

Contact us today at (520) 881-4900 to make the most informed decisions for your future.