Five Common Question on Social Security

September 07, 2023


The following presentation by New England Capital Financial Advisors, LLC (“NECFA”) is intended for general information purposes only.  No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from NECFA or any other investment professional of your choosing.  Please see additional important disclosure at the end of this penetration. A copy of NECFA’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at

Five Common Question on Social Security

Social Security, the program you may have spent a lifetime paying into, is designed to offer stability, supplemental income, and other valuable benefits that can play a role in your overall financial strategy after you retire.

We've pulled together answers to 5 questions our clients ask most frequently regarding Social Security. If you are nearing retirement, this Q&A is designed to help you better understand what to expect from Social Security.

1. How are Social Security Benefits Calculated?

Social Security benefits are typically computed using "average indexed monthly earnings." This average summarizes up to 35 years of a worker's indexed earnings. Social Security applies a formula to this average to compute the primary insurance amount (PIA). The PIA is the basis for the benefits that are paid to an individual.

In general, the higher your earnings (up to $160,200, the maximum taxable amount in 2023), the higher your benefits.1

2. When Can I Start Collecting Social Security Benefits?

You can claim Social Security benefits as early as age 62, but the longer you delay starting, the larger your monthly payments may be.2

If you wait until full retirement age to collect Social Security retirement benefits, you can receive 100% of your monthly retirement benefits.

If you wait even longer beyond your full retirement age, the Social Security Administration increases your benefit by up to 8% for every year you wait (up to age 70).

3. Can Social Security Impact My Retirement Cash Flow?

While you may have various sources of income to tap into during retirement, Social Security should not be overlooked when preparing your distribution strategy.

Here's a hypothetical example that outlines what it might take to replicate the income you could receive from Social Security:

  • Assuming an annual benefit in 2023 of $30,000, you would need to invest approximately $1,000,000 in an investment vehicle that yields 3% to generate that same income.

Remember, this is a hypothetical example used only for illustrative purposes—it is not representative of any specific investment or combination of investments. It's used to illustrate the cash flow potential of Social Security benefits.

4. Does My Spouse Get My Social Security On Top of Theirs When I Die?

In the event of your death, your spouse may be eligible for survivor benefits based on your Social Security record, but they will not receive these benefits in addition to their own—they'll receive whichever benefit is higher.3

Here are some factors from the Social Security Administration website to consider about survivor benefits:

  • If your surviving spouse, or a surviving divorced spouse, remarries before they reach age 60 (age 50 if they have a disability), they cannot receive benefits as a surviving spouse while they're married.
  • If your surviving spouse, or a surviving divorced spouse, remarries after they reach age 60 (age 50 if they have a disability), they will continue to qualify for benefits on your Social Security record.
  • If they're eligible for retirement benefits on their own record: If your surviving spouse, or a surviving divorced spouse, receives benefits on your record, they can switch to their own retirement benefit as early as age 62, assuming that they're eligible for retirement benefits and their retirement rate is higher than their rate as a surviving spouse or surviving divorced spouse.

5. Is Income from Social Security Taxable?

Social Security benefits are taxable, and the rate is based on your income, which includes:4

  • Adjusted gross income (includes earnings, investment income, and retirement plan withdrawals).
  • Tax-exempt interest, such as interest on municipal bonds.
  • Half of your Social Security benefit.

The Congressional Research Service found that the percentage of all tax returns with taxable Social Security benefits reached 33% in 2017 (the most recent data available). In 1999, fewer than 8% of all taxpayers reported taxable Social Security benefits, while the percentage is expected to increase to more than 50% by 2046.4

Here's a summary of how the taxes on Social Security income break down. Please note that the dollar-amount thresholds have remained the same since taxes on benefits were introduced in 1984. They are not adjusted for inflation.

If you are approaching the time to start collecting benefits, there are several potential ways to manage how your benefits are taxed. The simple way is to ensure that your income is less than the threshold at which taxes apply. So, it's critical to have a detailed understanding of your retirement accounts.


Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by New England Capital Financial Advisors, LLC [“NECFA”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from NECFA. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. NECFA is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the NECFA’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.newenglandcapital.comPlease Note: NECFA does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to NECFA’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a NECFA client, please contact NECFA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.