Understanding Social Security
Social Security is a federal insurance program that provides income to retirees, people with disabilities, and survivors of deceased workers. Funded through payroll taxes, it was designed to ensure a steady stream of income once people leave the workforce. With traditional pensions becoming rare and median retirement savings hovering around $200,000, Social Security remains the financial backbone for millions of Americans.
The Social Security Administration (SSA) bases your benefits on your 35 highest-earning years. The longer you work and the more you earn, the higher your benefits. You must have at least ten years of work credits to qualify.
When You Can Apply
You can apply for retirement benefits as early as age 62, but your monthly amount will be permanently reduced. Full retirement age (FRA) is between 66 and 67, depending on your birth year. For those born in 1960 or later, FRA is 67. If you file before that age, your benefit is reduced by about 5/9 of 1% per month for the first three years and 5/12 of 1% for each additional month.
For example, a person entitled to $1,000 per month at age 67 would receive only $700 if they start at 62. Similarly, a spousal benefit of $500 would drop to about $325. Applying early can make sense if you need income now or if poor health shortens your expected lifespan.
Why Waiting Can Pay Off
If you delay claiming beyond your FRA, you earn “delayed retirement credits.” Your benefit increases by two-thirds of 1% for each month you wait, or 8% per year. By waiting until 70, you can raise your monthly check by up to 24–32% compared with claiming at 67. A $2,000 monthly benefit at 67 could grow to $2,640 by age 70. After your 70th birthday, however, the increases stop. Waiting longer yields no further financial advantage.
What Happens at Age 70
Reaching 70 is the cutoff point. You must file to begin receiving benefits because the SSA will not automatically start payments. If you forget, you can still receive up to six months of retroactive benefits. Financial planners stress the importance of filing by your 70th birthday to avoid losing money. For spousal benefits, however, there are no delayed credits—so waiting beyond your full retirement age will only reduce what you receive.
Working While Receiving Benefits
You can work and collect Social Security at the same time. Before reaching your full retirement age, your benefits may be temporarily reduced if your income exceeds certain limits. But after you hit FRA, that restriction disappears. If you keep working after claiming benefits, your new earnings can even replace lower-earning years in your record, slightly increasing your monthly payment.
Applying for Benefits
You can apply online through SSA.gov, by phone at 1-800-772-1213, or at a local Social Security office. Before applying, gather documents such as your birth certificate, Social Security number, tax records, employment history, and direct deposit information. You can apply up to four months before the month you want benefits to start.
If you live abroad, you can manage your account through your online “my Social Security” account or get help at a U.S. embassy or consulate. These offices can assist with applications and provide income verification letters for visas or taxes.
The Trend: More Americans Filing Early
In 2025, Social Security applications surged by 17%, reaching a record 1.8 million new filings through May. Analysts attribute the increase to fear about the program’s solvency, an aging baby boomer population, and administrative changes. Despite rumors, Social Security is not going away. Even if its trust fund runs low around 2035, benefits would continue—though possibly at about 80% of current levels. Experts continue to advise against claiming early out of fear since doing so locks in lower payments for life.
Disability and Supplemental Income
Social Security also offers two programs for those unable to work:
Social Security Disability Insurance (SSDI) pays based on your prior earnings if you’ve worked long enough and are disabled.
Supplemental Security Income (SSI) is need-based, providing monthly support for low-income seniors or people with disabilities.
Both can be applied for online through your SSA account or by phone. The SSA defines disability as a medical condition expected to last at least one year or result in death that prevents “substantial gainful activity.”
State Taxes and Where You Keep More
At the federal level, up to 85% of your Social Security benefits can be taxable, depending on your income. However, 41 states and Washington, D.C., do not tax Social Security at all. Only nine states impose some form of tax: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Each has income-based exemptions, and West Virginia is phasing out its tax entirely in 2026.
Eight states—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming—have no state income tax at all, making them particularly favorable for retirees.
Filing Late: A Costly Mistake
If you pass your 70th birthday without applying, you are forfeiting income you’ve earned over decades of work. Federal studies show that from 2021 to 2023, about 129,000 people filed for benefits after 70, leaving an estimated $1.5 billion unclaimed. On average, each could have gained $37,000 over just two years.
Financial advisors emphasize: waiting past 70 never increases your benefits, and the SSA will not automatically start paying you. Create an account on SSA.gov, file as soon as possible, and verify your eligibility for spousal or survivor benefits to ensure you receive every dollar you’ve earned.
The Bottom Line
Social Security remains one of the most significant financial decisions of retirement. Claiming early can provide immediate relief but at a permanent cost. Waiting until 70 maximizes income, especially for those in good health or with longer life expectancies. Whether you live in Florida or Vermont, understanding how and when to apply can determine the difference between scraping by and living comfortably.
After decades of paying into the system, you deserve to collect every penny—just make sure you do it on time.
