Life After Retirement: Social Security Planning

Trent Bradshaw CFP®, AIF® & Brandon Rogers CFP®, AIF® |

Today, something is going on that you might not know about and, worse, might not know how to stop. The situation? Consumers are seeing an erosion of their retirement savings, their buying power, and their quality of retirement life. The culprit? Lack of proper Social Security planning.

When it comes to retirement savings, most retirees incorporate Social Security into their budget. After all, Social Security provides a foundation of retirement protection for people at all earning levels. However, the average Social Security retirement benefit in June 2020 was about $1,514 a month, or about $18,170 a year. For the average retiree at age 67, this only replaces about 35% of historical earnings.

Almost all workers participate in Social Security's build-up by making payroll tax contributions, and almost all elderly Americans receive Social Security benefits. In fact, 97% of the elderly (aged 60 to 89) receive or will receive Social Security benefits.2 Women find Social Security essential to their financial security. Women tend to earn less than men, live an average of 2.5 years longer, accumulate fewer savings, and receive smaller or no pensions. Thus, this demographic runs the genuine risk of outliving their savings.


So if we're all getting money, what's eating away at our benefits?

First, know that most retirees enroll in Medicare's Supplementary Medical Insurance (also known as Medicare Part B) and have Part B premiums deducted from their Social Security checks. As health care costs continue to outpace general inflation, those premiums will take a bigger bite out of their checks.

Next, remember that Social Security is subject to taxation – anywhere from half to as much as 85% of your combined income from Social Security and other sources that push you above the thresholds.

  • Up to 50% of Social Security income is taxable for individuals with a total gross income including Social Security of at least $25,000 or couples filing jointly with a combined gross income of at least $32,000.
  • Up to 85% of Social Security benefits are taxable for an individual with a combined gross income of at least $34,000 or a couple filing jointly with a combined gross income of at least $44,000.9

Can you avoid paying Social Security taxes? Maybe. If your total income falls below the taxable thresholds, you won't owe taxes. And, if you live in one of 37 states that don't tax this income, you can skip paying as well.

Finally, while sweet retirement can't come soon enough for some of us, it's important to recognize that both the timing of your retirement and your age will significantly impact the Social Security benefits you'll claim.


Consider what happens if you begin receiving benefits before your full retirement age. You can retire as early as age 62, but this may result in a reduction of as much as 30%. When you choose to retire early, the benefit is reduced 5/9 of 1% for each month before normal retirement age, for up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of 1% per month. On the flip side, starting to receive benefits after the typical retirement age may result in more considerable benefits. With delayed retirement credits, you can receive your largest benefit by retiring at age 70.10


Determine the right time to retire and the steps to safeguard your retirement savings.

First, access the Social Security Agency's tax calculator11 and learn the results from early or delayed retirement as a percentage of your primary insurance amount. If you choose a month and year for which you'd like to begin receiving benefits, the calculator will advise you on what you can expect.

Next, consider keeping your retirement income in Roth IRA accounts. Since contributions put in are made with after-tax dollars, the money you take out isn't subject to tax provided they're taken after age 59½, and you've had the account for more than five years. Additionally, the payout won't affect your taxable income calculation.

A final strategy is to withdrawal taxable income before retirement. If you plan carefully, you'll have to pay the tax now, but the proper withdrawal amount won't affect your current tax bracket, and you'll be able to use the money later. By using these distributions to boost your income when you're retired or nearing retirement, you might be able to delay applying for Social Security benefits and that'll increase the size of the payments.



  • “Policy Basics: Top[ Ten Facts about Social Security” Center on Budget and Policy Priorities. [Accessed Aug 13, 2020]
  • “How to Avoid Paying Taxes on Social Security Income” Investopedia. [Accessed Mar 19, 2021]
  • “Social Security Benefits” [Accessed 2021]