Planning for Your Social Security Benefits in Retirement

Today, Social Security benefits represent about 30 percent of the income for people over age 65.1 But there is significant concern among workers about access to their benefits in the future. In fact, 72 percent of Americans worry their Social Security won’t be there when they retire.2
To help combat these fears, planning ahead for retirement by balancing personal savings with Social Security benefits is key—and it involves an important variable: life expectancy.
What’s the connection between life expectancy and Social Security?
The amount of your individual Social Security benefit is determined by multiple variables, including earnings history, employment history, and the age you begin collecting payouts.
Retirees can begin collecting Social Security benefits once they reach age 62, but there are advantages to waiting at least until full retirement age—or longer. In fact, the longer retirees wait to begin collecting Social Security payouts (up to age 70), the larger the benefit amount will be. But how do you know if it makes sense to begin collecting payouts as soon as you’re eligible or if you should wait to maximize your benefit?
It all comes back to life expectancy. Although you can’t know for certain, there are factors that can help you make an educated guess about your life expectancy. A good starting point is to consider what ages family members passed away.
- If you have a family history of serious illness or premature death, planning for a more conservative life expectancy may be in your best interest.
- If your family has a history of living well into their 90s, you might want to plan for a longer life expectancy.
Let’s look at an example of how life expectancy could influence your decision about when to collect your Social Security benefit.
Social Security benefits and life expectancy: Finding the break-even point
In this hypothetical example, we’ll consider two workers who retire at the same time, with the same conditions:
- Retire at age 62
- Identical work and earnings history
- $250,000 in retirement savings
- $30,000 of annual expenses in retirement
The only difference between our two retirees is life expectancy. Retiree 1 expects to live until age 80, while Retiree 2 expects to live until age 90.
Because of the shorter life expectancy, Retiree 1 begins collecting Social Security benefits before reaching full retirement age. This cuts the monthly benefit to $1,400. Meanwhile, Retiree 2 waits until the Social Security payout reaches its maximum benefit (at age 70) to collect. This puts the monthly Social Security payout at $2,480—significantly higher than Retiree 1.
The discrepancy in the two retirees’ claiming ages also affects the overall account balance of their personal retirement savings.
Remember, Retiree 1 and Retiree 2 started with $250,000 in personal savings. Since they decided to retire at age 62, they could both immediately tap into their personal savings to supplement their lifestyles.
- Retiree 1 receives a monthly Social Security payout beginning at age 62, while Retiree 2 won’t receive any Social Security payouts for eight more years.
- Since Retiree 2 will have to fund eight years with personal savings, the account balance depletes much more rapidly.
- But, thanks to the significantly larger monthly Social Security payout Retiree 2 receives at age 70, the account lasts longer.
It’s clear life expectancy plays a huge role in determining your Social Security collection strategy. Having a plan in place prior to reaching retirement age will help you know how—and when—it makes the most sense for you to begin collecting your Social Security benefits.
Why it’s important to plan ahead for retirement
While Social Security can help you achieve retirement readiness, it was not designed as an income replacement. To help insure against longevity risk in retirement, follow these two steps:
- Before you retire: Set retirement savings goals and fund your retirement plan over a long period of time to grow your personal savings.
- After you retire: Maximize your income by pairing your personal savings with Social Security benefits—and the right Social Security claiming strategy.
For additional tips and information about preparing for a financially secure retirement, check out our retirement savings resources.
1Security Fact Sheet. 2023. Social Security Administration.
2Brenden Rearick. "Why So Many Americans Believe Social Security Is Going Away (Even Though It Isn’t)." Money.com. May 18, 2023.