While planning for retirement can be complicated, it’s something that needs to be taken seriously. 

As you near 60, it’s common to think more about retirement funds and securing your financial future. And often, Social Security is top of mind as it’s the most common source of retirement income.



You may have questions about the process like: how do you apply for Social Security benefits? And how much will you get per month? What are the potential tax obligations? 

Most people don’t realize that a financial advisor can guide them through the process of Social Security benefits.

With their expertise, you can feel confident about meeting your financial goals. Navigating Social Security doesn’t have to be stressful when you have the right financial advisor by your side.



Key Takeaways

• Social Security offers a safety net for retirees, individuals with disabilities, and survivors.
• Funded by payroll taxes, Social Security should be a key part of your retirement income strategy.
• A financial advisor helps you make the most of your Social Security benefits.

Social Security 101: Back to Basics

What Is Social Security?

Created in 1935, the Social Security program was originally an old-age insurance plan for retirees. Later, the program extended benefits to survivors of beneficiaries and disabled workers.

Currently, the Social Security Administration (SSA) oversees the Social Security program in the US. This government program provides benefits for retirees and their families. It offers a safety net to retirees and people unable to work due to disability.

Over 72 million Americans will collect Social Security benefits in 2024.

To qualify for Social Security benefits, you need at least 10 years of work and must be 62 or older. Your benefit amount depends on your highest 35 years of earnings. The longer you work and the higher your earnings, the greater your monthly benefit will be.



Individuals can determine their own benefit based on their work history by using the SSA's online tools and resources.

Types of Social Security Benefits

Retirement Benefits: For individuals who have worked and paid Social Security taxes for at least 10 years (40 quarters).

Disability Benefits (SSDI): For individuals who are unable to work due to a severe, long-term disability.

Survivor Benefits: For widows, widowers, and dependents of a deceased worker who had earned enough Social Security credits.

How Is Social Security Funded?

The Social Security program is funded through payroll taxes collected under the Federal Insurance Contributions Act (FICA).

Employers and employees each pay 6.2% of income up to the taxable maximum of $168,600 in 2024. Meanwhile, the self-employed people pay both shares, which is 12.4%. These payroll taxes go into two trust funds:



• Old-Age and Survivors Insurance (OASI) Trust Fund: Pays out monthly benefits to retirees and their family members and survivors
• Disability Insurance (DI) Trust Fund: Covers benefits for workers with disabilities and their family members and survivors.

How Can a Financial Advisor Help in Social Security Planning?

A financial advisor is like a coach who helps you get the most out of your benefits. By looking at your overall financial situation, your advisor can provide personalized advice and reduce the stress of planning for Social Security.

Let’s say your goal is to maximize your benefits. To achieve this, a financial advisor will suggest when’s the best time to receive benefits. Waiting until age 70 to claim benefits can lead to higher monthly payments.

In addition, financial advisors help navigate spousal benefits to ensure both you and your spouse get the best possible payments. Spousal benefits include eligibility rules such as the percentage of the benefit, qualifying age, marriage duration, and the option for surviving spouses to receive a widow's or widower's benefit. Here are the other ways a financial advisor can guide you through the complexities of Social Security:

• Integrate Social Security benefits into your overall retirement plan.
• Suggest strategies like Roth conversions or optimized retirement account withdrawals to reduce taxes.
• Stay updated on regulation changes that may impact your benefits.

Maximizing Social Security Benefits

Maximizing your Social Security benefits can make a big difference in your retirement income. It's all about knowing when to claim your benefits and understanding spousal and survivor benefits.

Work for at Least 35 Years

Your Social Security benefits are calculated based on your 35 highest-earning years.



If you have fewer than 35 years of earnings, zeros are averaged in. This eventually lowers your monthly payout. Working for 35 years or more gives your Social Security benefits a boost.

Know the Best Time to Claim Social Security Benefits

There’s no one-size-fits-all answer for the best age to start collecting Social Security benefits. It’s a personal choice that depends on your situation. The age at which you first claim benefits sets the baseline for the amount you’ll receive for the rest of your life.

Imagine your full retirement age (FRA) is 67. Receiving benefits at age 62 reduces your retirement check by 30%. Meanwhile, delaying until 70 gives you an 8% increase per year after FRA.



Knowing when to claim Social Security benefits allows you to maximize your lifetime income. This strategy can help boost benefits, especially if you expect to live longer. A reliable NJ advisor can help analyze your health and other factors to find the best time for you.

Account for Inflation

Social Security benefits include COLA adjustments to help keep up with inflation. This helps maintain the purchasing power of your retirement benefits.

For 2024, beneficiaries got a 3.2% increase in benefits, which went into effect last January.



Aside from COLA adjustments, consider incorporating investments that offer protection against inflation.

Financial Strategies for Different Life Stages

Different stages of life require different financial strategies. Whether you're single, married, divorced, or a surviving spouse, a financial advisor can help you tailor a plan that suits your specific situation.

Tailoring Approach for Single vs Married

When you're single, focus on building your financial cushion. Save as much as possible in retirement accounts like 401(k)s or IRAs. Since you might not have dependents, your financial plan can be simpler. Opt for comprehensive health insurance and consider long-term care insurance early.

For married couples, it's important to coordinate your financial plans. Jointly assess your retirement savings, accounting for both pensions and social security benefits. Collaborate on investments and ensure that both spouses are financially literate.



Regardless of how many retirement accounts you have, always review and update your beneficiary designations.

Navigating Benefits for the Divorced and Widowed

If you're divorced, you may be entitled to benefits based on your ex-spouse's earnings.   Divorce affects many aspects of your financial wellfare.

Let’s say you’re a 62-year-old divorced spouse, and your marriage lasted for over 10 years. Since you’ve met the requirements, you can receive an amount equal to 50% of your ex's benefits.

Divorce can greatly affect your retirement accounts and pensions. Seek professional advice to divide assets equitably and update your financial plans accordingly.



Widows or widowers are eligible for survivor benefits, given they meet the criteria. Generally, they can receive a portion of their deceased spouse’s social security. Survivor benefits are usually used as supplement income.

Planning for the Longevity of Retirement

Understanding life expectancy is key when planning for retirement. According to the Centers for Disease Control and Prevention, the average life expectancy is 74.8 years for males and 80.2 years for females.

With people living longer, it makes sense to ensure your savings last. Here are some strategies to consider:



• Diversify your investments to spread risk and potentially increase returns.
• Calculate your expected retirement income from all sources, including pensions, social security, and retirement accounts.
• Monitor and adjust your financial plan regularly to match changes in your life and economic conditions.

Tax Implications and Retirement Accounts

As someone who will receive Social Security benefits, you need to understand how taxes can affect your payouts. This way, you can leverage tax-advantaged accounts to optimize your retirement income.

Understanding Tax on Social Security Benefits

Let's break down how your Social Security benefits might be taxed. The amount of tax you pay depends on your combined income. This includes your adjusted gross income, non-taxable interest, and half of your Social Security benefits.

If you file as an individual:

• With a combined income between $25,000 and $34,000, up to 50% of your benefits could be taxable.
• For incomes above $34,000, up to 85% of your benefits may be taxed.

For example, you have a combined income of $30,000. You receive $20,000 in Social Security benefits, which means $10,000 of those benefits can be subject to taxes.

If you file a joint return with your spouse:

• A combined income between $32,000 and $44,000 may result in up to 50% of your benefits being taxable.
• If your combined income exceeds $44,000, up to 85% of your benefits could be taxable.

If you're married but file separate returns, you'll likely pay taxes on your individual benefits.



According to the Social Security Administration, no one pays federal income tax on more than 85% of their Social Security benefits. To make the most of your retirement income, learn more about your potential tax liability.

Leveraging Tax-Advantaged Retirement Accounts

Using tax-advantaged accounts like 401(k)s, IRAs, and Roth IRAs can be a smart way to manage your tax load in retirement.

Traditional 401(k)s and IRAs: With these accounts, you don't pay taxes on your contributions until you withdraw them, typically in retirement. This deferral can be beneficial if you think you'll be in a lower tax bracket when you retire.

Roth IRAs: These accounts offer tax-free growth and withdrawals. Roth IRAs can be particularly advantageous if you expect your tax rate to rise in the future.



Example: Let's say you contribute to a Roth IRA. You can withdraw the funds tax-free in retirement, which won't increase your combined income. This could potentially reduce the portion of your Social Security benefits that are taxed.

Frequently Asked Questions on Social Security Benefits

Getting clear advice on Social Security can make a big difference in your retirement planning. Below are answers to some common questions about navigating Social Security with a financial advisor:

Start Planning Your Retirement Income Today!



Given the retirement benefits at stake, it can be worthwhile to consult a financial advisor regarding Social Security. Advisors don’t just know the rules—they know how to apply them to your unique situation.

At Leonard Financial Solutions, we know how even small decisions can have a great impact on the rest of your financial life. That’s why we are committed to helping you optimize your Social Security benefits.

If you’re looking for an advisor in New Jersey, look no further than us.

Schedule a FREE appointment today https://www.leonardfinancialsolutions.com/free-consultation, and make financial planning effortless!