A Serious Reminder About Social Security from AARP

As people get ready for retirement, one big worry pops up repeatedly: will Social Security be strong enough to support them? According to the Social Security Administration (SSA), if nothing changes in Congress, the Old-Age and Survivors Insurance (OASI) trust fund won’t be able to pay full benefits after 2033. Right now, this fund can cover 100% of what it owes, but after that, it will only manage about 77%. Imagine—a sudden 23% cut in your monthly benefits could shake up your entire financial plan.

Another key concern for many is when to start receiving Social Security benefits. So, what should you do?

AARP’s Advice: The Right Age to Take Social Security

Suze Orman, a well-known personal finance author working with AARP, has some strong advice on this topic. She says that you should think twice before taking Social Security at age 62. This is the earliest age you can apply for benefits. Orman specifically warns singles or high earners not to rush into it. If you claim benefits at 62, you might lose out on 25-30% of your monthly payment compared to waiting until your full retirement age, which can be 66 or 67 depending on when you were born.

There’s another layer to this, too. If you receive benefits early and pass away before your spouse, their survivors’ benefits will also be reduced. Orman suggests waiting until you are 70 to claim benefits. The reason is simple but powerful: for every year you delay between your normal retirement age and 70, Social Security adds a whopping 8% to your monthly payout!

Think about it: where else can you find a guaranteed return of 8%? Currently, many bank accounts only offer around 2%. So, holding off on taking Social Security is one of the best ways to ensure you have a stronger financial future.

Making the Delay Work for You

Now, delaying Social Security until you turn 70 might sound tough, but it can be done. You can use savings from your 401(k) or IRA to support yourself in your 60s. The beauty of this approach is that the longer you let your retirement savings sit, the more they can grow. If you have to withdraw from these accounts, try to keep your withdrawals as low as possible.

If you can work a few extra months, that will help too. Just three to six more months of work and delaying Social Security can be like saving an extra percentage point in your retirement accounts over 30 years. If you love your job, consider enhancing your skills so you can stay in the game longer. If not, perhaps look for less demanding roles that can cover most of your living costs.

What’s Changing with Social Security Laws

Let’s take a look at some legislative changes affecting Social Security. When Social Security first started in 1935, benefits were completely tax-free. In 1983, Congress decided that up to half of the benefits could be taxed. Just a decade later, this increased to 85%. The income thresholds that determine whether benefits are taxed have not changed since then. This means that more retirees, even those with modest incomes from pensions or part-time work, are starting to pay tax on their benefits.

The One Big Beautiful Bill Act introduced in 2025 made certain lower federal tax rates permanent. Also, the higher standard deduction introduced in 2017 is now a permanent feature. For 2025, the standard deduction is set at ₹15,750 for single filers and ₹31,500 for couples filing jointly. This will also adjust according to inflation each year.

Key Benefits for Older Taxpayers

While the One Big Beautiful Bill Act didn’t alter the taxation of Social Security, it added an income deduction for older taxpayers. Anyone aged 65 or older can now claim a ₹6,000 income deduction, even if they haven’t started collecting Social Security benefits. This new deduction applies to all taxable income, separate from Social Security.

Additionally, existing deductions based on age remain untouched; they are ₹2,000 for single filers and ₹1,600 per spouse for married couples. For couples where both are 65 or older, there’s an extra ₹12,000 deduction available. You can use these deductions whether you choose to take the standard deduction or itemize your taxes.

To qualify for the full ₹6,000 deduction, your Modified Adjusted Gross Income (MAGI) needs to be under ₹75,000 as a single filer or ₹150,000 for those who are married and filing jointly.

Conclusion

To sum it up, planning for Social Security is more than just checking a box; it’s about securing your financial future. Understanding the best time to claim benefits and taking tax deductions can make a significant difference.

So, prepare wisely for your retirement and keep an eye on upcoming changes that could affect your finances.

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Original Text – https://www.thestreet.com/retirement/aarp-has-blunt-warning-for-americans-on-social-security