For millions across the country, the 2026 midyear mark is as much a time for financial planning as it is for celebration. This summer marks America's 250th birthday — a historic milestone for our country's independence.

But while the nation was founded on a rebellion against unfair taxes, tossing your computer into the nearest harbor probably wouldn't work when it comes time to pay the IRS; December 31st is the final deadline for most 2026 tax year money moves.

Instead, you might just want to look to the wisdom of founding father and financial thinker, Benjamin Franklin, this planning season.

Franklin famously noted that, "nothing can be said to be certain except death and taxes." And though you can't escape either, you can control how much you overpay the government.

By applying Ben Franklin's wisdom to midyear tax planning today, you could help secure your retirement nest egg, fund intergenerational wealth, and potentially lower your tax bill in 2026. Here's how.

1. "The Doors of Wisdom are never shut."

Popularized in the 1755 edition of the Almanac, Franklin quoted this proverb to challenge the status quo in how we do things; it's easy to fall into a routine of wash, rinse, and repeat.

But routinely doing your taxes the same way every year can cost you. Gain a little midyear tax wisdom through the following ways:

• Learn midyear strategy. You don't have to wait until April to learn a new tax strategy. Platforms like the IRS Video Learning Portal and tax software academy portals offer free, year-round webinars to help you spot planning opportunities before the year-end deadline strikes.
• Revitalize your filing plan. Your revenue streams may change, and so should your taxes. For instance, if your financial situation has simplified, you might no longer need an expensive tax professional anymore. Alternatively, if you've bought property or started a business, doing taxes yourself might cause you to overlook certain tax deductions and credits.
• Save with free tax tools. There are several ways to file your taxes for free each year. For example, the IRS reports that millions of taxpayers have saved over a billion dollars collectively using IRS Free File alone. Evaluate free filing tools available to you now, while you're outside of the chaotic tax season stress.

2. "Beware of little expenses; a small Leak will sink a great Ship."

In the Almanac, Poor Richard warns that "a little punch" or extra tea now and then might seem like "no great Matter," but accumulated tiny expenses can sink your long-term financial ship.

In terms of midyear tax planning, the lesson is simple: Don't miss the small stuff. Now is the perfect time to audit your tax records before the end-of-year holiday chaos.

• Audit your health accounts. Check your Flexible Spending Account (FSA) or Health Savings Account (HSA) balances. Ensure your medical procedures, prescriptions, and qualifying purchases are properly documented with clean receipts (no matter how small), and budget out your remaining FSA funds if your plan has a strict year-end deadline.
• Track new tax provisions. If you plan on claiming provisions from the 2025 Trump tax bill, tracking documentation is key. For example, the car loan interest deduction allows you to deduct up to $10,000 in interest, but only if the vehicle was bought new, is used primarily for personal use, and had its final assembly in the U.S. Make sure you qualify for all the tax deductions and credits you plan on claiming.
• Organize the paper trail. Start digging through your kitchen junk drawer or email folders. You'll want to make sure you have your tax mileage log on file if you're, say, a ride-share driver, or have your gambling tax documentation if you've placed a bet this year. Start the family's designated "tax folder" now to avoid unnecessary stress later.

3. "Early to Bed and early to rise, makes a Man healthy, wealthy, and wise."

Printed in the 1735 edition of the Almanac, this phrase originally praised the discipline of an industrious lifestyle. Let's modernize that approach and polish it into a midyear tax mantra:

"Early to check and early to optimize makes you more planned, less stressed, and energized."

Corny, sure.

But a midyear checkup ensures you aren't accidentally giving Uncle Sam an interest-free loan — or worse, setting yourself up for an IRS underpayment fee or penalty. Here's the phrase broken down:

For more information on how to plan your tax payments and optimize your withholdings, check out Kiplinger's reports on Estimated Tax Payments and 13 Things Every Worker Needs to Know About Withholding.

4. "Having been poor is no Shame, but being ashamed of it is."

Printed in 1749, this quote reminds us that financial struggle is often a consequence of shifting circumstances, not a lack of virtue. In tax planning, knowing how to handle these financial pivots — and leveraging the IRS code to protect your downside — can be a key tool in your tax toolbelt.

Here's how we can relate that to our midyear tax planning strategy:

• Harvest your investment losses. Know when a position isn't working out. Through tax-loss harvesting, you can sell underperforming equities to counteract your capital gains. If your losses exceed your gains, you can use them to offset up to $3,000 of ordinary income, carrying the rest over to future years.
• Strategize charitable giving. If you want to support a cause close to your heart, plan those donations now rather than scrambling in December. Strategizing early helps you maximize itemized charitable deductions and navigate the new 2026 rules on charitable giving.
• Utilize a QCD. If you're age 70½ or older, you can make a qualified charitable distribution (QCD) directly from your IRA to an eligible charity. This counts toward your required minimum distribution (RMD), the minimum annual amount you must withdraw after reaching a certain age, and also helps keep that money out of your AGI, potentially lowering your tax bill.

5. "Money can beget Money, and its Offspring can beget more."

Moving away from the Almanac, this quote comes from Franklin's 1748 essay, "Advice to a Young Tradesman." Franklin was explaining compound interest, noting that money is of a "prolific generating nature."

Retirement accounts and legacy planning are perfect examples of compounding wealth while avoiding high taxes. And midyear is a great time to double-check that your savings vehicles are on track.

• Maximize pre-tax contributions. If you're currently working and in a higher tax bracket than you expect to be in retirement, maximize your traditional 401(k) or other traditional IRA contributions now. It lowers your taxable income today and gives you more immediate cash flow to save or invest. Later, when your federal tax bracket is (hopefully) a little lower, you'll be taxed on the contributions when you withdraw them.
• Plan the "perfect" Roth conversion window. If you anticipate an upcoming low-income year — maybe you're freshly retired but haven't started drawing Social Security or reaching your RMD age yet — plan a potential Roth IRA conversion ahead of time. Converting traditional retirement funds into a Roth during a low-income year allows you to pay a low tax rate on the conversion, but while there are six reasons to convert to a Roth, there are reasons not to.
• Evaluate your estate tax plan. Check in with your financial advisor about your new estate tax exemption amount. Are you optimizing for the stepped-up basis of inherited assets, leaving appreciated equity without capital gains after death? Also, review whether you should use the annual gift tax exclusion to pass tax-free assets to children or grandchildren in 2026.

From shifting brackets to new legislative bills, tax planning is typically a moving target that requires at least a bi-annual checkup.

While a great financial professional can help you tailor these moves to your specific roadmap, keeping these five pieces of financial wisdom in mind may help you avoid being caught off guard and keep you focused on what matters most this summer — celebrating.

Happy planning!

This article is for informational purposes only and does not constitute professional tax or financial advice. Tax laws (including state taxes) are subject to change and vary by individual circumstances. Consult with a qualified tax professional regarding your specific situation.

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The death of a partner often forces a surviving spouse to face two challenging and conflicting timelines at once: The open-ended process of grief and the immediate reality of financial and tax deadlines and consequences.

Chief among these is the so-called "widow’s penalty."

Despite the name, we're not talking about an official IRS penalty or surcharge. Rather, the widow's penalty is a series of tax and financial shifts that occur when a surviving spouse's tax filing status changes from married filing jointly to single.

The amount of tax-friendly space available to the surviving spouse changes as the standard deduction shrinks, federal income tax brackets compress, and Medicare income thresholds become less favorable.

Meanwhile, tax returns still have to be filed. Retirement accounts continue generating required distributions, and Medicare premiums are recalculated according to established rules and deadlines.

To visualize this, imagine traffic flowing on a four-lane highway suddenly merging into one. The number of cars remains the same, but there is far less room to move.

Understanding these changes and how they interact can help surviving spouses anticipate surprises before they appear on a tax return, Medicare notice, or unexpected bill. Here's more of what you need to know.

The reality of single filing status after a loss

At the center of the widow’s penalty is a deceptively simple shift: moving from married filing jointly to filing as a single taxpayer.

In the year a spouse dies, the surviving spouse can generally still file a joint tax return. By the following tax year, however, many widows and widowers begin facing a very different tax landscape.

Wider federal income tax brackets, a larger standard deduction, and other advantages available to married couples may no longer apply, potentially increasing the taxes owed on the same retirement income.

You can see the differences in the following table.

2026 Tax Thresholds: Single vs Married Filing Jointly

For 2026, the 12% federal tax bracket extends to $100,800 for married couples filing jointly. For single filers, that same bracket tops out at $50,400.

Federal income tax brackets compressed. A widow whose retirement income once fit comfortably within the 12% bracket while married may suddenly find any income over $50,400 pushed into the 22% bracket the very next year.

The standard deduction is cut in half. Even if the surviving spouses' total household income drops slightly, a much larger portion of it is exposed to higher tax rates. This is because the surviving spouse is now claiming a smaller standard deduction; they often end up paying taxes on a much larger share of their remaining income than they expected.

In short, the widow's penalty shift isn’t necessarily driven by more income. Instead, it often reflects the reality that the tax code provides fewer advantages once a surviving spouse begins filing as a single taxpayer.

Your income may fall, but taxable income often doesn’t

One of the most common misconceptions surrounding the widow’s penalty is the assumption that household income is automatically cut in half after the death of a spouse.

Retirement finances, however, are rarely that simple, and a lower income does not automatically result in a lower tax bill.

A surviving spouse may lose one Social Security benefit and potentially a portion of pension income. Other sources of retirement income may continue unchanged, including:

• Investment income continues, survivor benefits may kick in, and retirement accounts must still generate Required Minimum Distributions (RMDs).
• These mandatory withdrawals increase adjusted gross income (AGI), which can further complicate the picture by triggering higher Medicare premiums and increasing the taxable portion of Social Security benefits.

Ultimately, household income may decline, but the tax advantages that once helped shelter that income decline as well.

For instance, if both you and your spouse qualified for the new "senior bonus" deduction, your total tax break might have been $12,000. Now, that tax deduction is capped at $6,000.

Other overlooked tax deductions and credits might be lower with just one individual in the household rather than two.

Why more of your Social Security benefits may become taxable

Many retirees assume that if they’re receiving fewer Social Security benefits after the death of a spouse, they’ll owe less tax on those benefits. In reality, the opposite can sometimes occur.

• Although a surviving spouse may lose one Social Security check, they often continue receiving the larger of the two benefits.
• At the same time, they may be filing as a single taxpayer under a different set of income thresholds.
• As a result, a larger percentage of Social Security benefits may become subject to federal income tax.

For single filers, the thresholds used to calculate taxable Security benefits are significantly lower than those available to married couples filing jointly.

But the rule of taxability remains the same. Up to 85% of their Social Security benefits may be taxable, depending on a survivor’s income, including from retirement accounts, pensions, and other sources.

That is another example of how the widow’s penalty can emerge through changes elsewhere in a surviving spouse’s financial picture.

Medicare premiums can rise even if income falls

For many retirees, Medicare premiums are one of the last places they expect to encounter the widow’s penalty. Yet for some surviving spouses, healthcare costs can become part of the equation.

In many cases, the answer lies in a Medicare surcharge known as the Income-Related Monthly Adjustment Amount, or IRMAA. Higher-income beneficiaries pay additional Medicare Part B and Part D premiums, and those surcharges are based on income reported on a tax return from two years earlier.

• Because IRMAA uses a two-year income lookback and lower income thresholds for single taxpayers, some surviving spouses may find themselves paying higher Medicare premiums even if household income has declined.
• In some cases, surviving spouses may be able to request an IRMAA adjustment based on a qualifying life-changing event, including the death of a spouse, by filing Form SSA-44 with the Social Security Administration (SSA).

Still, IRMAA is another example of how several separate rules can quietly stack on top of one another, exacerbating the widow's penalty.

What surviving spouses can do now

Even though every situation is different, there are some planning opportunities worth discussing with a qualified tax professional or financial advisor who can advise you on your specific situation. Here are a few to get you started.

Taking advantage of the final joint-filing year. The year a spouse passes away provides a final opportunity to leverage the wider "married filing jointly" tax brackets and a larger standard deduction before your filing status changes.

Exploring strategic Roth conversions. Converting portions of a traditional IRA into a Roth IRA during the final joint-filing year — or during lower-income transition years — can help shrink future mandatory distributions and reduce long-term taxable income.

For example, converting $25,000 from a traditional IRA to a Roth IRA during a lower-income year may allow a surviving spouse to lock in a lower tax rate and create a source of tax-free income later in retirement.

Monitoring Medicare income thresholds. Because Medicare relies on a two-year lookback to determine IRMAA surcharges, spikes in taxable income today can dramatically increase your future Part B and Part D premiums.

Working with a tax professional to spread large withdrawals or Roth conversions over multiple years may help avoid crossing into a higher IRMAA bracket.

If your income falls due to a qualifying life-changing event, you may be able to request a new IRMAA determination using Form SSA-44.

Coordinating Social Security survivor benefits. Deciding when to switch from your own retirement benefit to a survivor benefit (or vice versa) requires careful timing to maximize lifelong guaranteed income while managing the sudden shift to single tax brackets.

Reviewing your Social Security claiming strategy may help optimize survivor benefits while minimizing potential tax consequences.

And keep in mind, this piece discusses federal income tax rules and changes, but state income tax consequences may differ. So always consult a trusted advisor who can help with your individual circumstances.

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To help you understand what is going on in the economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here's the latest...

Social Security’s cash shortfall is nearing, according to government accountants. The point at which the program’s trust fund of prior tax revenue runs out and legally triggers a 22% drop in payments is now estimated to hit at the beginning of 2033.

What can Congress do to head off disaster and keep the immensely popular program solvent? We expect lawmakers to find some solution. But anything they choose will be painful. The gap between what the Social Security Administration takes in taxes and what it pays out as benefits has been growing for decades. But before that, when the program was running a surplus, Congress spent the extra cash, leaving IOUs in the trust fund. Now, the Treasury is repaying those IOUs via money from general taxation and mounting debt issuance. Once the IOUs have been repaid, though, the feds can no longer pay more in benefits than they take in from Social Security’s dedicated payroll tax. Any fix will require more taxes, more debt or lower benefits.

Let’s look at some of the options on the table. Congress could let the Treasury sell more bonds to fill Social Security’s shortfall. That would sidestep the need for new taxes, but further blow up the deficit, which is already running at $2 trillion a year. Bond investors may balk at adding to it. Other common proposals get Congress partway to a solution. Among them:

• Lifting the full retirement age by a year eases the program’s tax gap by 12%.
• Raising the cap on earnings subject to the payroll tax would cover 26% of it. That’s assuming the cap rises from the present $184,500 of earnings to $330,000. Hiking the payroll tax one percentage point for everyone also yields 26% of the money Congress needs to find to keep scheduled benefits intact after 2033.
• Other options include reducing annual benefit increases and similar tweaks.

None solves the funding gap on its own, and all will be wildly unpopular among whichever voters find themselves paying more, getting less or doing both.

Given the difficult politics involved, we look for Congress to drag its feet and put off any solution for as long as it can. Social Security has long been known as the third rail of American politics. Calling for less-generous benefits or higher taxes is a surefire way to not get reelected. But the funding crunch can’t be wished away.

Ultimately, expect a mix of benefit cuts and tax increases, as lawmakers try to minimize the ways in which they antagonize voters. It’s too early to predict just how the pain will be distributed, but we would guess that upper-income folks will bear more of it than those lower down the income ladder. That may mean means testing for benefits, smaller annual increases, a higher cap on payroll taxes, etc.

This looming battle figures to dominate U.S. politics in the coming decade.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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As America gears up for its 250th anniversary this July, plans for the usual red, white, and blue spectacles are in full swing. Tall ships will sail into New York Harbor, and politicians are polishing soaring speeches to celebrate two and a half centuries of the American experiment. But a quick peek behind the fireworks reveals a striking bit of historical deja vu.

Fifty years ago, the nation marked its Bicentennial while wrestling with a very specific, stubborn set of economic headaches. Fast forward to 2026, and we are blowing out the candles next to the same triad: sticky inflation, pain at the gas pump, and a looming deadline to fix Social Security.

The real takeaway of the Semiquincentennial isn't that we are stuck in a grim rerun — it’s that these structural hurdles are uniquely resilient. As we toast to 250 years, the best way to celebrate American exceptionalism might be to finally solve the leftover homework of the 1970s.

1. Social Security insolvency — again

While Americans celebrated the Bicentennial, a flawed statutory formula enacted in 1972 to implement the Cost of Living Adjustments — indexing of benefits to protect beneficiaries from the effects of inflation — was quietly draining the Social Security Trust Fund. This has become known as the “double indexing” or “decoupling” problem. Rather than fixing the core demographic imbalance, Congress passed a minor patch in 1977.

The historic 1983 legislative rescue — which delayed cost-of-living adjustments, introduced benefit taxation, and raised the retirement age — was explicitly designed to buy 40 to 50 years of breathing room. In 2026, the borrowing time has almost run out at the same time that our population is aging.

There are approximately 62 million adults age 65 and older living in the United States, representing about 18% of the total population — a steep increase over 1976 or 1983. In 1976, the number of people 65 and older was 22.95 million or 10.4% of the population. In 1983, that number had climbed to 27.4 million, or 11.5% of the total population.

The public is less than confident that those in charge will resolve the problems without cutting benefits. Almost 70% of the adults aged 45 and older surveyed by PlanGap are not confident that the government will solve the Social Security funding challenge without reducing benefits. While 83% say that Social Security will play a major or moderate role in their retirement plan, 68% are concerned either "a great deal" or "a lot" that they won't receive the benefits that they are entitled to.

• The 1976 pre-crisis: In 1976, policymakers were concerned because a flawed benefit-indexing formula passed in 1972 was accidentally over-indexing benefits for inflation, causing the trust funds to drain faster than expected. Congress tried a temporary patch in 1977, but did not address the deeper structural demographic issues. By 1982, the Trustees warned that the system was months away from insolvency.
• The 1983 "Salvation": Enter the bipartisan Greenspan Commission. The resulting 1983 Amendments "saved" the system through a painful compromise: delaying the Cost-of-Living Adjustment (COLA), gradually raising the full retirement age (FRA) from 65 to 67, and introducing taxation on Social Security benefits for high earners. It bought the system exactly what it promised: about 40 to 50 years of breathing room.
• The 2026 reality: That 1983 clock has officially run out. We are right back in the 1976 pressure cooker. The 2026 Social Security Trustees Report currently projects that the Old-Age and Survivors Insurance (OASI) Trust Fund will hit depletion in 2032. If Congress waits until the final months to act — just like they did in 1983 — the required fixes (payroll tax hikes or benefit cuts) will have to surpass the 1983 adjustments because the demographic wave of retiring baby boomers is already fully cresting.

2. Inflation: The ghost of stagflation

The Bicentennial took place during a short-lived economic exhale. Inflation had cooled to 5.8% from its 1974 double-digit peak of 11.1%. From that point on, however, inflation rebounded, climbing every year until it reached a crushing 13.5% by 1980.

Today, the U.S. economy faces a familiar pattern. The COVID-era inflation surge peaked at an annual rate of 8.0% in 2022 — a big departure from the previous decade (2010-2020), when annual inflation averaged just 1.77%.

Now, after waking up from a post-pandemic optimism, families are confronting a sticky, resilient 4.2% inflation rate this May, proving price stability is far harder to sustain than Washington admits. Even if inflation rates fluctuate, the baked-in price increases from past inflation persist and still sting. Affordability issues won't be cured solely by a falling inflation rate.

• 1976: The mid-1970s were the cradle of modern "stagflation." While CPI had briefly dipped from its 1974 double-digit peaks down to around 5.8% in 1976, it was a false sense of security. The underlying structural drivers were left unaddressed, setting the stage for the massive second inflation wave that topped out at over 13% by 1980.
• 2026: We are living through a strikingly similar echo. After a massive post-pandemic inflation spike that peaked in 2022, prices began to moderate, giving everyone hope of a "soft landing." However, fresh energy and geopolitical shocks have driven inflation up 4.2% year-over-year in May 2026. The realization is sinking in that inflation is sticky, structural, and deeply resilient — just like it was in 1976.

3. The price of gas: geopolitical shocks and the $4 pump

By 1976, the gas lines of the 1973-74 OPEC embargo had vanished, but the era of permanently cheap fuel was over. Energy costs became an erratic wildcard that weighed on consumer confidence and squeezed household margins.

Fifty years later, the vulnerability remains unchanged. With current geopolitical friction pushing the national average past $4 a gallon, the modern consumer is learning that decades of political rhetoric cannot insulate a local gas station from overseas supply shocks.

Gas prices are dropping, but the return to pre-war levels will be slow. Continued tensions with the Iranian government, combined with low inventories and restocking demands, are expected to keep prices high for the foreseeable future.

• 1976: The country was still reeling from the psychological and economic trauma of the 1973 OPEC oil embargo. Even though the recent gas shortages are in the past, the era of permanently cheap fuel is dead. Energy costs became a volatile wildcard that dictated consumer confidence and corporate margins.
• 2026: History is repeating itself at the pump. The recent oil shock triggered by the war with Iran has driven the national average for gasoline past $4 a gallon for the first time in years. Just like in 1976, energy-driven inflation is eating directly into household budgets, proving that 50 years later, the U.S. economy remains highly vulnerable to overseas conflicts.

The present is too close to history

Every national milestone invites a backward glance, but the truest mirror for America in 2026 isn't 1776 — it’s 1976. When the nation marked its 200th birthday, the hangover of stagflation and energy shocks had left voters deeply unsettled about the future. It was also the exact moment the structural fuses on our major entitlement programs began to smoke.

Seven years later, the bipartisan 1983 Greenspan Commission enacted fixes to try to save Social Security with a cocktail of tax hikes and a delayed retirement age. It promised roughly 40 years of breathing room. Today, as we celebrate America 250, that runway has officially ended and the Social Security trust fund is projected to lapse into insolvency in 2032. The parallels between the Bicentennial and the Semiquincentennial are too close to ignore, and this time, there is nothing to celebrate about this history repeating itself.

More on America's 250th Birthday

• America is Turning 250 — But We Didn't Get Serious About Saving for Retirement Until 50 Years Ago
• America's Cost of Living at 200 vs 250: How Affordable is American Life Now?
• How Has Retirement Changed in the Last 50 Years? Take Our Quiz
• 9 Historic Sites to Visit With Your Grandkids for America's 250
• Financial Advice From America's Founding Fathers
• Which Presidents Are on the Social Security Payroll?

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Here at Kiplinger, we want to ensure that you have the best financial advice at your fingertips — and that you can understand the specialized terminology often used for complex topics such as investing.

That's why we put together this short quiz to test your knowledge on a handful of key investing terms. Knowing what these words and phrases mean will help you stay a step ahead in those big decisions you have to make about what's in your portfolio and why.

And don't worry if you miss an answer or two. You can follow the links below the quiz to review these investing terms and more.

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For decades, older Americans could count on their monthly Social Security check arriving in the mail. But in 2025, the Social Security Administration (SSA) was ordered to move to electronic payments.

The SSA plans to complete the full transition to electronic payments for all beneficiaries this year. Payments will be delivered electronically, either through direct deposit to a bank or credit union account, or through a Treasury-approved prepaid debit card. Checks will be sent in the mail only as a last resort, and for that you'll need a government waiver.

The SSA says the goal is to improve speed, security and reliability, and the change is part of a broader, government-wide move to electronic payments.

But for those who still rely on mailed checks, the shift away from paper raises practical questions. Vulnerable older adults will now have to consider banking access, fraud prevention, family involvement, digital literacy and their comfort level with an electronic payment system.

Why this matters now

For many retirees, Social Security is their only source of income. It is the income that pays the rent, mortgage, utilities, groceries and prescriptions. Even a short delay or disruption can create real hardship.

That is why this issue deserves more attention than it has received. The end of paper checks is not simply a "technology upgrade." It is a consumer protection issue.

The people most likely to be affected include:

• Older beneficiaries who do not use online accounts
• Individuals in rural areas
• People without traditional bank accounts
• Those with cognitive decline
• Widows or widowers who relied on a spouse to manage finances
• Beneficiaries who are wary of scams or uncomfortable sharing banking information

In other words, the beneficiaries who still receive paper checks may be among those least prepared to navigate a fast-moving digital payment system without help.

What replaces the paper check?

Beneficiaries have two electronic payment options.

The first is direct deposit into a checking or savings account. Beneficiaries can sign up:

• Through their personal "my Social Security" account at ssa.gov
• On the Treasury's Go Direct website
• By calling the Treasury's Electronic Payment Solution Center (1-800-333-1795) or the SSA's national phone number (1-800-772-1213)
• At their financial institution

The second option is to use the Direct Express® Debit Mastercard®, a Treasury-sponsored prepaid debit card for people who do not have a bank account. With Direct Express, the federal benefit payment is deposited onto the card account on the payment date.

The card can be used to make purchases, pay bills or get cash, and it doesn't require a bank account.

That second option is especially important because requiring every older beneficiary to "just use direct deposit" is not always possible.

Some people are unbanked because they've had negative banking experiences or live where transportation to a bank branch is limited.

Others may be unable to maintain a bank account because of fees, overdrafts or confusion managing the account.

The identity-proofing issue

While paper checks are being phased out, the SSA has tightened identity-proofing requirements around certain benefit and payment changes:

Individuals who cannot use their personal "my Social Security" account may need to visit a local Social Security office to prove their identity for certain actions, including changing direct deposit information.

People receiving payment by paper check must visit an SSA office before changing their mailing address.

SSA is using additional fraud-prevention measures to verify bank account information connected to direct deposit changes.

Direct deposit fraud can be devastating. If a scammer diverts a retiree's Social Security payment into another account, the beneficiary may not discover the problem until the money does not arrive. By then, rent may be due and automatic payments may fail. Recovering the funds can take time.

But stronger identity rules also create friction for legitimate beneficiaries.

• A frail 89-year-old widow who no longer drives may find it difficult to visit a field office
• A beneficiary without internet access may not be able to complete online identity proofing
• A family caregiver may know exactly what needs to be done but may not have legal authority to act

That is the heart of the paper check problem: The government is trying to reduce fraud and modernize payments, but some of the people most in need of protection may also face the greatest barriers to compliance.

Watching for scams during the transition

Major government changes create openings for scammers.

Families should be alert for calls, texts, emails or letters claiming that a beneficiary's Social Security payments will stop unless they immediately provide a Social Security number, bank account number, debit card number, PIN or password.

Direct Express warns that it will never contact cardholders by phone, email or text to ask for a card number, password, PIN or security code.

The safest approach is simple: Do not respond to unsolicited messages. Instead, contact SSA, the Treasury's Go Direct program, your financial institution or Direct Express directly, using known, official contact information.

Older adults should also be warned about "helpers" who offer to set up direct deposit but ask to use their own bank account. Social Security benefits should be deposited into an account that properly belongs to the beneficiary or to an authorized representative payee.

What families can do to help

The most important first step is to identify whether an older parent, relative or client still receives a paper check. Many family members assume payments are already electronic because most beneficiaries converted years ago. That assumption may be wrong.

Next, confirm where the payment should go. If the beneficiary has a safe, low-cost checking or savings account, direct deposit may be the simplest option. If not, review the Direct Express card as an alternative.

Families should also help beneficiaries create or secure their personal "my Social Security" account, where appropriate.

This should be done carefully. The beneficiary should not share passwords casually, and family members should avoid taking over an account unless they have proper legal authority or the beneficiary is capable and has clearly asked for help.

For individuals with cognitive impairment, serious illness or declining ability to manage money, families may need to explore SSA's representative payee process.

A power of attorney may be useful for many financial matters, but SSA generally does not recognize a power of attorney for managing Social Security benefits in the same way a bank might.

When a beneficiary cannot manage benefits, SSA's representative payee rules become important.

Finally, the beneficiary should build a payment calendar showing their expected Social Security deposit date, what bills are tied to that payment, and whom to call if money does not arrive.

Electronic payments reduce mail delays and stolen checks, but they do not eliminate every possible problem.

The bigger lesson

The end of mailed Social Security checks is not just about how money moves. It is about whether older Americans can safely access the benefits they earned.

For many beneficiaries, electronic payment is faster, safer and more convenient. But for the small group still dependent on paper checks, this transition requires planning, communication and trusted support.

Families, advisers and caregivers should not wait until a payment is missed. The time to review payment arrangements, banking access, identity-proofing options and scam protections is before there is a crisis.

Social Security has always been more than a monthly benefit. For millions of retirees, it is the foundation of their financial security. Making sure that benefit arrives safely, reliably and in the right hands is now an essential part of retirement planning.

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• Filed for Social Security Too Soon? 2 Ways to Get a Do-Over

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The financial professionals who contribute to Kiplinger's Adviser Intel are always here to make sure you have the information you need to make critical decisions about your retirement planning, estate planning and tax planning.

They've recently written about the growing number of Americans working past retirement age — and why the consequences can be more complicated than you might think in terms of Social Security, healthcare and tax.

This quiz is designed to test what you've learned. Let's see what you know! (And don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

Please note that this quiz has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or financial advice.

Read More

• Social Security, Healthcare and Tax: The Potential Complications of Working Past Retirement Age
• Still Working While Receiving Social Security? A Financial Adviser's Guide to the Earnings Test
• Your Retirement Age Is Just a Number: Today's Retirement Goal Is 'Work Optional'

More and more retirees are "retiring" from retirement.

Data from the National Institute for Occupational Safety and Health shows the number of retirement-age Americans in the workforce is growing.

And in a survey by Asset Preservation Wealth & Tax, 51% of respondents who'd reached retirement age said they plan to work indefinitely.

The reasons for retirees planning to work into their later years vary. Some simply have to from a financial perspective, while others want to live an active, purposeful life.

However, working during retirement brings challenges and trade-offs, especially when it comes to Social Security benefits, taxes and healthcare. The decisions you make about when to start claiming Social Security and whether you plan to keep working can have lasting consequences.

The pitfalls of claiming Social Security too early

A common phrase we hear is, "I'll just take my Social Security benefits at age 62." While it's true this is the first age you can start claiming benefits, doing so can backfire, particularly if you keep working.

If you claim and continue working before reaching your full retirement age, which is between 66 and 67 depending on your birth year, a portion of your benefits may be temporarily withheld owing to Social Security earnings limits.

For 2026, you can earn up to $24,480 before benefits will be withheld. In the year you reach full retirement age, the earnings limit increases to $65,160. After you reach your full retirement age, there are no earnings limits.

Upon reaching full retirement age, your benefit amount will be recalculated to give you credit for any benefits reduced and withheld.

Additionally, once you've started collecting Social Security, stopping and starting benefits is complicated and can permanently reduce your lifetime payments. It's not a switch you can easily flip on and off.

Bridging the healthcare gap: Age 62-65

Another major issue for people who claim Social Security benefits early is healthcare. Medicare eligibility doesn't begin until age 65, so if you leave your employer's health plan and retire at 62, you'll need to find coverage on the open market, which can get expensive.

Working part-time may provide access to employer healthcare, but that could put you at risk of exceeding the Social Security income limits. You could turn to private insurance, but the premiums can easily use up a large portion, or even all, of your Social Security check.

The three-year gap between age 62 and 65 is one of the most overlooked in retirement planning. I recommend sitting down with a financial adviser to go through all of your options before claiming early and potentially setting yourself up for financial failure, watching sky-high out-of-pocket premiums drain your savings faster than expected.

Income, taxes and the cost of working in retirement

Even after reaching full retirement age, when the Social Security earnings limit no longer applies, income from work can still impact your finances. That's because it depends on your total income.

If you're single and your combined income, the sum of your adjusted gross income (AGI), non-taxable interest and half of your Social Security, exceeds $25,000, or $32,000 for married couples, up to 85% of your Social Security benefits may be taxable.

In other words, the more you earn from working, the more you may have to give back in taxes. It's not necessarily a reason to stop working, but it does highlight the importance of strategically coordinating your income sources.

Knowing when to claim

Many people think waiting to claim Social Security until age 70 is always the best option, since benefits grow by about 8% each year after full retirement age until age 70. While that may maximize the amount you receive every month, it's not right for everyone.

For some retirees, the time value of money may matter more. For example, some may start taking benefits at 67 or 68 and use that income strategically by reinvesting it, reducing portfolio withdrawals or using it to strengthen their overall retirement cash flow.

There's also a break-even point, where the total amount collected by claiming early can surpass what you'd get by delaying. For married couples, it often makes sense to strategically stagger claims, with one spouse claiming earlier and the other delaying for a higher survivor benefit.

At the end of the day, there's no one-size-fits-all when it comes to claiming Social Security. It all comes down to finding the right balance of longevity, income needs and your overall financial plan.

Social Security should supplement, not replace, your income

Social Security was never designed to be the sole source of retirement income. It was meant to supplement, not replace, your paycheck.

You will likely need around 70% of your pre-retirement income to maintain your current lifestyle, and Social Security was only meant to cover about 40% of that.

That isn't to say Social Security doesn't matter. After all, those benefits come from decades of contributing payroll contributions. It's money you've earned. While the benefit may not be life-changing, it can still help cover major expenses, such as housing, travel or healthcare.

The importance of having a plan for claiming Social Security

Working in retirement can be incredibly rewarding, personally and financially. But it also requires strategic planning, especially if you plan to claim Social Security early.

Deciding when and how to claim Social Security is one of the most important financial choices retirees make because reversing your initial decision can be complicated and costly.

Before you claim, make sure you understand how your job, income and healthcare could affect your benefits. Working with a financial professional who can help you strategize Social Security with your overall financial plan can make a big difference. The right timing and strategy can help you keep more of what you've earned and lead to a more confident retirement.

Related Content

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• We've All Heard the Buzz About Roth Conversions, But Not Everyone Will Like the Reality
• 4 Pro Tips for Successfully Scaling the Medicare Mountain

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Touted by the Trump administration as "eliminating taxes on Social Security," the new, temporary "senior bonus deduction" is adding to concerns about Social Security's solvency, even as a COLA increase is expected for the coming year.

When President Donald Trump and Republicans in Congress passed the so-called "big beautiful bill" last year, one of the most talked-about provisions was a new, but temporary, bonus deduction for older adults.

The $6,000 tax break, available to eligible taxpayers age 65 or older from 2025 through 2028, can be stacked on top of the standard deduction and the extra standard deduction for those over 65 and is available to those who itemize deductions. Yes, there are income phaseouts.

Still, the Trump administration has pointed to the deduction as a windfall for seniors, effectively eliminating taxes on Social Security. (No, the 2025 Trump tax bill doesn't change Social Security tax law and doesn't necessarily eliminate SS taxes. However, in many cases, the deduction can reduce taxable income enough for some to effectively exempt Social Security income from tax.)

But…what if that benefit could weaken Social Security's finances?

That's an emerging concern: a policy marketed as eliminating taxes on Social Security could worsen the system's long-term funding gap and perhaps affect the timing of future benefit reductions.

Curious? Here's more of what you need to know.

How the $6K senior deduction interacts with Social Security taxes

Let's start with some facts.

• The $6,000 senior deduction doesn’t affect the payroll tax (12.4% levy split between workers and their employers) that funds Social Security.
• Neither the 2025 tax bill nor the new over-65 bonus deduction changes the rule that allows the IRS to tax up to 85% of Social Security benefits depending on income.

However, the senior bonus deduction can lower taxable income for millions of older adults. That can, in turn, push some retirees below the thresholds at which their Social Security benefits become taxable, reducing the amount of tax paid by those who remain above them.

So, what's the big deal? Well, federal income taxes on Social Security benefits are credited to the Social Security trust funds. That revenue stream is small compared with the amount that comes from payroll taxes, but it is part of the program’s long-term financing picture.

Why Social Security solvency concerns are resurfacing now

Concern about the potential impacts of the senior bonus deduction on Social Security is surfacing against a backdrop of projections from the Social Security Administration’s Office of the Chief Actuary.

• Current estimates are that the Old-Age and Survivors Insurance (OASI) trust fund will be depleted around 2033.
• At that point, incoming payroll taxes would cover roughly 77% to 80% of scheduled benefits, depending on assumptions.
• So, even before any new tax policy impacts are considered, that implies a potential across-the-board benefit reduction of about 20% to 23% unless Congress intervenes.

From a tax perspective, the Joint Committee on Taxation (JCT) has estimated that the $6,000 senior tax break could initially (through 2029) reduce federal revenues by roughly $91 billion. The 10-year costs could fall in the $125 to $220 billion range by 2034, depending on whether the provision is extended.

That figure includes several moving parts, but part of the revenue loss stems from reducing the tax treatment of retirement income, including Social Security benefits.

Because federal taxes paid on Social Security benefits are credited to the program’s trust funds, lower taxable income can also mean less money flowing into the system over time.

Important to note: Social Security’s financial challenges are driven primarily by demographics, not this new deduction. The system’s long-term funding gap already existed well before the Trump/GOP reconciliation tax package became law.

But that’s also why some analysts are paying attention to even relatively modest revenue changes around the edges. In a program already facing long-term fiscal pressure, policies that reduce money flowing into the trust fund — even indirectly — can affect projections at the margins.

And that’s where some irony comes in: a policy promoted as delivering tax relief tied to Social Security could potentially slightly weaken one of the revenue streams tied to the program’s long-term finances.

How much could the $6,000 deduction shift the Social Security depletion timeline?

In situations where revenue tied to benefit taxation is reduced, some long-range projections suggest the depletion date could move sooner by a matter of months to roughly a year. How much earlier depends on various assumptions about economic growth, payroll tax receipts, and behavioral responses.

That doesn't necessarily change the trajectory of Social Security’s finances. And it doesn't create insolvency on its own or replace the structural drivers of the system’s funding imbalance.

But it highlights how even seemingly small changes in related revenue sources (like reduced tax collections resulting from a new $6,000 tax break for millions of older adults) can affect the timing of trust fund exhaustion in models that already show a narrow runway.

What this means for retirees now

For many older adults, the senior bonus deduction is a relatively straightforward tax cut:

Taxpayers age 65 or older can stack the $6,000 deduction on top of the standard deduction and the existing extra standard deduction for those 65-plus. Eligible taxpayers who itemize can also claim the bonus deduction.

• You must be 65 or older by the end of the given tax year.
• The bonus amount tops out at $6,000 for individuals and $12,000 for married couples, when both spouses are 65 or older.
• This deduction phases out above a certain income level: Modified Adjusted Gross Income (MAGI) of $75,000 for singles and $150,000 for those married, filing jointly. It phases out completely for MAGI above $175,000 and $250,000, respectively.
• The IRS says you must "include the Social Security Number of the qualifying individual(s) on the return, and file jointly if married, to claim the deduction."

For some middle- and upper-middle-income retirees, the new deduction can reduce or even eliminate taxes on Social Security benefits by lowering taxable income. For lower-income retirees who already pay little or no federal income tax, the impact is often much smaller.

• Middle- and upper-middle-income seniors will likely account for roughly three-quarters of the total tax relief under the measure, according to the Tax Policy Center.
• In 2026, average savings are projected at about $220 for middle-income households and around $300 for those in the upper-middle income tier.

Keep in mind: Despite how the Trump administration has framed the policy, the deduction does not change Social Security tax law or permanently eliminate taxes on benefits. Instead, it works indirectly by reducing the amount of income exposed to taxation in the first place. So keeping an eye on your taxable income and existing SS tax thresholds remains important.

What's next? Funding conversations for Congressional lawmakers.

Potential ways to address the Social Security funding issues floated by policymakers in recent years include raising payroll taxes, lifting or eliminating the income cap, gradually increasing the retirement age, reducing cost-of-living adjustments, and means-testing benefits for higher-income retirees.

But...no specific bipartisan proposal seems to be on deck yet, so as always, stay tuned.

Learn More

• How the $6,000 Senior Bonus Deduction Works
• What You Need to Know About Taxes on Social Security Benefits
• College Towns Are Becoming Retirement Destinations in 2026: Does the Tax Math Add Up for Retirees?
• The Extra Standard Deduction for Those Age 65 and Older

Deciding when to collect Social Security — whether early, at full retirement age or age 70 — is a high-stakes decision. Your choice has a lasting impact on your retirement cash flow, your lifestyle and your family's financial security.

You have up to a year to change your mind, but after that, your decision is essentially etched in stone for life. It doesn't help that the rules and combinations surrounding Social Security can get complicated; at last check, there are hundreds of different claiming paths you can employ.

"Social Security comes up a lot for my clients," says Cindy Wilson, a senior wealth adviser at HB Wealth. "There is never a standard answer since your life situation, assets saved and goals are all different."

While you can start collecting benefits early at age 62, doing so means an up to 30% reduction in lifetime benefits. If you were born in 1960 or later, you must wait until age 67 to hit your full retirement age (FRA) and receive your full amount. For every year you delay until age 70, your benefit grows by an extra 8%.

That timing significantly impacts your monthly check. For example, take the 2026 average Social Security benefit of $2,071 for someone with a full retirement age of 67. If you claim at 62, you'd receive $1,450 a month. Wait until your full retirement age, and that increases to $2,071. Hold out until 70, and the check jumps to $2,568 a month.

But there is more to this decision than just the monthly amount. Your longevity, cashflow needs and the impact on your family all come into play. That's why it's vital to weigh every factor before committing.

With that in mind, here are three questions to ask yourself before deciding when to begin collecting Social Security.

1. Does longevity run in my family?

Nobody knows for sure how long they'll live, but when it comes to deciding when to begin collecting Social Security benefits, it's a big factor to consider.

Denny Artache, president and CEO of Artache Financial Group, says whether longevity runs in your family is one of the first questions you need to ask yourself. If you begin collecting benefits at 62 and live to 90, you may have benefited from a bigger monthly payout.

But if you wait until your full retirement age of 67 and die a year later, you'll never reach your break-even point. That occurs when the cumulative amount of the higher monthly checks you receive by waiting finally exceeds the total amount you would have collected by starting early.

"I have some people who come to my workshops and say, 'What if I die in a year or two?' If that is your mindset, then go ahead and take it (early)," says Artache. "But if you do live into your 80s and possibly 90s, it could mean a difference of six figures in benefits you are collecting."

That's why longevity is so important. If your family has a history of living long, you might want to consider delaying until at least your full retirement age or even later. If your family history points toward a shorter lifespan and/or your health is failing or compromised, you might want to begin collecting earlier.

While there's no hard and fast rule to determine if there's longevity in your family, you can gauge it in part by looking at your ancestral lifespan, or the age at which multiple family members lived. Having a great aunt who lived to 95 is great, but having multiple relatives who lived past 90 is a stronger indicator of longevity.

The age at which family members fell ill, your inherited trends in blood pressure and cholesterol, and their specific lifestyles can all provide clues about your own health trajectory. However, keep in mind that genetics doesn't paint the whole picture — your daily habits have a direct impact on your longevity.

2. Do I need the money now, or can I wait?

Cashflow is a big consideration in retirement. When the paychecks stop, unless you have a pension, you have to rely on your savings and your Social Security to get by for what could be 30 years of retirement.

That's why Isabel Barrow, executive director of financial planning at Edelman Financial Engines, says the next question you need to ask yourself is: Do you need the money right away, or can you wait?

"If you don't have enough money to cover your expenses and you have to use Social Security to pay for Medicare or pay for food," then taking it earlier is more important than waiting for a bigger payout, she says.

But if you can hold off and tap other sources without getting into debt or selling investments in a down market, it might be more advantageous.

Keep in mind that Social Security has a cost-of-living adjustment, which isn't true of many pensions and investments. That's why Artache says it might be better, depending on your retirement savings and longevity picture, to delay Social Security and live off the investments first.

Some people who don't need the money will elect to take Social Security as soon as possible out of fear that it will run out of money. They don't care if it means a smaller payout; they just want their fair share.

While it's true that the Old-Age and Survivors Insurance Trust Fund, which pays Social Security benefits, is projected to run out of money in the first quarter of 2032, it won't go bankrupt. If nothing is done by then, benefits would be cut by 23%, and beneficiaries would receive 77% of their benefits.

3. What impact will my claiming decision have on family members?

If you're married, when to collect Social Security benefits isn't an individual decision. The timing will impact how much your spouse receives when you pass.

If you wait until at least your full retirement age, that guarantees your spouse will have a bigger check than if you take it before that. That's why the third question to ask yourself is: What impact will my claiming strategy have on family members?

Wilson says it's common for the spouse with the bigger check to delay collecting Social Security benefits, while the other spouse begins receiving payments. That ensures a bigger benefit for the surviving spouse.

Another consideration, says Wilson, is the impact collecting will have on your legacy. If you delay and must spend more of your assets while you wait for a bigger check, are you OK with depleting your retirement savings and reducing the amount that gets passed on to heirs?

"For some people, it's not worth delaying. They want to leave a bigger pot for their family," she says.

Whether or not you'll work in retirement is yet another factor. If you are under your full retirement age and earn more than $24,480 in 2026, the Social Security Administration will temporarily withhold $1 for every $2 you earn above that limit.

Additionally, you must consider the tax bite. If your combined income, including Social Security, exceeds certain thresholds, up to 85% of your benefits might be subject to federal income tax.

Working while collecting benefits can also potentially trigger higher Medicare premiums (IRMAA) if your total income crosses specific levels. All this will have an impact on your family.

Get help if you're unsure

Deciding when to claim can be complicated, which is why Barrow says to seek help from a financial adviser or the Social Security Administration before making a final decision. There are also online calculators, tools and software that can help with the decision.

You can contact a Social Security office to get answers to your questions, whether in person or on the phone. Keep in mind that while staff can explain the rules and provide your specific benefit numbers, they're prohibited from telling you when you should claim. Ultimately, that decision is yours to make.

"It can be really costly to make a mistake because once you decide and start taking Social Security, that decision in many cases is irreversible," says Barrow. "Usually, people decide without all the information. Do not go this alone."

Editor's note: This article is part of an ongoing series looking at three questions to ask yourself before making a major financial or lifestyle decision. The other stories in the series are: 3 Questions to Ask Before Deciding if a Roth Conversion Is Right for You, 3 Questions That Reveal If You're Actually Ready to Age in Place, 3 Questions That Determine If You're Actually Ready to Retire Early, 3 Questions to Ensure Your Retirement Nest Egg Is Inflation-Proof and 3 Questions to Ask Before Unretiring.

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When it comes to imparting retirement advice, Dave Ramsey has been at it for more than three decades. The retirement expert, author and podcaster has helped millions of people navigate the complexities of retirement saving and preparing.

While not everyone agrees with the advice Ramsey has to offer — from saving 15% of your annual salary to not relying on Social Security only in retirement — most can agree that Ramsey is influential in the world of personal finance.

As you approach your golden years or if you're already in them, filtering his high-energy principles into actionable strategies can be the difference between a stressful retirement and a secure one. With that in mind, here are nine pieces of Dave Ramsey advice that retirees might want to live by.

Nine pieces of Dave Ramsey advice that can help guide retirement

1. "Always think of this payout [Social Security] as icing on the cake, not the cake itself."
Ramsey Solutions blog, June 11, 2024

Social Security is a crucial source of income, and for many retirees, it's often the only one. Unfortunately, it might not be enough.

For 2026, the average monthly Social Security check is $2,081.16. If that's your sole source of income, you might have to downgrade your lifestyle or get a part-time job to make it work.

Ramsey suggests people save about 15% of their income each year for retirement, instead of assuming Social Security will be enough. Remember, any amount you can save for retirement is better than nothing.

2. "Inflation comes and goes, so do returns. … What you don't want to do is draw out so much that you end up running out of money before your life is over."
Ramsey Everyday Millionaires, podcast May 15, 2025

When creating a retirement withdrawal plan, inflation has to be taken into account. It can impact your daily expenses and cannot be ignored. The same can be said of market returns. They can ebb and flow, creating short-term volatility.

The trick during these times is to keep withdrawals steady and on plan. You can run out of money in retirement if you withdraw too much, warns Ramsey. If you withdraw money during a downturn in the markets, you're more likely to sell a holding for a lower amount.

The right withdrawal strategy will be different for everyone, but common ones include the 4% rule, the bucket approach and the pay yourself strategy.

3. "Retirement planning isn’t an 'old people' thing. It’s a smart people thing. And it’s never too early to start planning for your retirement future."
Dave Ramsey blog post, January 6, 2026

It's never too early or too late to start planning and saving for retirement. Young people might think it's something they can worry about later, while older adults might assume it's too late to make a dent.

Both assumptions are wrong — anyone can plan for retirement, and the benefits can be substantial. Even a little bit saved can grow significantly, thanks to market returns and compounding.

If you don't want to hire a financial adviser to create a retirement plan, there are plenty of online calculators, software and tools to help you build your own.

4. "No one leaves a legacy by accident. You must live life on purpose and come up with a plan to protect your legacy and make sure the baton is passed to the next generation."
Ramsey Solutions blog post, May 8, 2025

If legacy is at the top of your priority list, this one is for you. With these words, Ramsey is reminding us that you must work hard and plan hard to build a legacy you can pass on to the next generation.

That means not only setting financial goals and boundaries and living within them, but also creating an estate plan to protect them.

It might be the last thing you want to do, but creating a will, trusts and healthcare directives ensures your legacy can carry on. Find a comprehensive guide to estate planning here.

5. "At most any age at any income, 15% is a good, healthy amount (to save) ... but it's not a magic number."
The Ramsey Show, March 11, 2022

The sooner you start saving for retirement, the bigger the nest egg you'll amass. Whether you have years left in the workforce or are thinking of retiring soon, saving for it can have a big impact on your retirement lifestyle.

Ramsey thinks people should save around 15% of their annual income for retirement, but cautions it's not a "magic number."

You might need more or less depending on your age and goals. Contributing that much to a 401(k) or IRA might not be possible for some individuals. In that case, aim for at least the company match, if it's offered.

Ramsey says the key to making sure you have enough saved is to create a budget that you can realistically stick to. It gives you permission to spend, and it also brings you peace of mind.

6. "The trick to knowing when to take Social Security is knowing when you are going to die. Once you have that figured out, then you can calculate it precisely."
Ramsey Everyday Millionaires podcast, May 15, 2009

Nobody knows when they'll die, which makes deciding when to claim Social Security so scary. Do it too early and live to 90, and you could run out of money. Take it so late that you don't have much time to enjoy it while you're still healthy, and you'll regret waiting.

While there isn't a precise way to decide when to claim Social Security benefits, there are some things to consider:

• If you take it before your full retirement age (67 for people born in 1960 and beyond), you'll receive up to a 30% reduction in your lifetime benefits.
• If you wait until your full retirement age, you'll receive your full benefits.
• Every year you wait after your full retirement age (up until age 70), you'll receive an 8% increase.

7. "Retirement is not an age; it’s a financial number."
Ramsey Solutions blog April 17, 2025

It's hard to call it quits if you won't be able to live comfortably in retirement, which is why Ramsey calls it a "financial number." You might want to retire at 62, 65 or even 70, but if you don't have enough money, you can't. Your retirement isn't dictated by age; it's dictated by your bank account.

To put yourself in a good retirement position, Ramsey is a fan of investing and paying off your mortgage. If you invest your savings, you have the opportunity to see them grow and compound. If you pay off your mortgage, it's a large expense you're eliminating in retirement, he says.

Still, critics argue that if you have a low mortgage rate, it's better to invest that money instead of paying it off.

8. “People underestimate how long they’ll live and how much money they’ll need…They retire broke or way too early. It's like jumping out of a plane without checking your parachute.”
Interview with Kiplinger, October 21, 2025

Retirement can last 30 years, and who knows how much longer as advances in medicine and technology continue undeterred. That means you'll need a lot of money to live comfortably in retirement. Whether you amass a small fortune or a little nest egg, determining how much you'll need is the key to success.

Do that by coming up with a realistic number that takes into account every expense, including needs and wants. Once you know how much you'll need, you can plan.

It could mean increasing your savings rate, finding ways to cut expenses or simply staying the course. That number is your parachute, so make sure you calculate it correctly.

9. "The emergency fund is not about making money, it's insurance to keep you from cashing out or going into debt for stuff."
The Ramsey Show, Feb. 11, 2016

Whether you are nearing or are in retirement, you should have an emergency fund that covers three to six months of expenses.

For pre-retirees, that emergency fund will prevent you from taking on debt close to retirement. For retirees, it prevents them from withdrawing money from their retirement account at an inopportune time.

The last thing Ramsey wants them to do with their emergency fund is worry about making money off of it. The focus of the emergency fund shouldn't be on earning a return but on having money easily accessible in case of an emergency.

Plan, plan and more planning

Retirement doesn't have to be a giant question mark. If you take a page out of Ramsey's playbook — saving for retirement and mapping out the journey step-by-step — you can enable a more confident future.

Whether you're deciding when to collect Social Security benefits or thinking about your legacy, following Ramsey's advice can help you retire with peace of mind.

Editor's note: This article is part of an ongoing series featuring the best retirement quotes and wisdom from top financial experts, leaders, and public figures. Other articles feature Warren Buffett, Michael Jordan, Mark Cuban, Jimmy Buffett, Dr. Seuss, Bruce Springsteen, Bob Dylan, Vince Lombardi, Dolly Parton, Ozzy Osbourne, Stevie Nicks, George Carlin, and Billy Joel.

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• 5 Social Security Myths That Can Cost You
• 3 Questions That Determine if You’re Actually Ready to Retire Early

When it comes to personal finance advice, delaying Social Security benefits until age 70 to lock in a higher benefit for life is a popular strategy. The main perk of waiting? It boosts your benefit by 8% each year after you reach full retirement age (67 for people born in 1960 or later) up until age 70. Who doesn't like to get a raise?

Moreover, waiting until 70 can be a smart strategy for protecting your spouse's benefits should you pass away first.

But there's a catch: You need to be able to generate enough income in those so-called "gap years" to replace the Social Security check you've put on hold. To do so, you'll need to build a financial bridge with your savings and investments to close the funding gap.

Step 1: Survey the landscape — is a bridge realistic?

Just as you would only construct a bridge if you were certain you had the materials and budget, you should also assess your chances of spanning 62 to 70 without tapping Social Security. Is it even possible? "Analyze your living expenses and see whether you can generate enough income from your assets to support your objective of deferring Social Security," says Brian Vendig, chief investment officer at MJP Wealth Advisors.

Don't forget to account for the Medicare gap; you'll need to cover health insurance premiums and other expenses from ages 62 to 65, unless you're on your spouse's health plan.

Veteran Kiplinger readers might have already done this preliminary step. If so, congratulations! You can now go to step 2.

If not, don't be discouraged.

You'll ideally work with a financial adviser, or at least, consolidate your accounts into "aggregator" software so you can review your assets all at once. While the pros use some of the best tools around (such as eMoney or RightCapital), there are affordable software solutions for DIY planners, as well.

First, focus on your assets. Determine the balances of your savings accounts, traditional IRAs and 401(k)s, taxable brokerage accounts, Roth IRAs and other income sources that could cover the funding gap. What amount of income could you reasonably generate each year? (We'll get into more detail later, so an estimate is fine for now.)

Next, assess your transactions to determine your average annual spend during your bridge years. A review of statements in the past 12 months can help answer that question.

Finally, ask yourself if your estimated income could cover your annual spending needs.

If the answer is no, waiting until 70 to turn on benefits likely isn't viable. However, don't despair. Depending on how large the gap is, you might be able to build a shorter bridge to Social Security, say, for a few years. You could also pick up some consulting or part-time work to stretch your savings from ages 62 to 67. (You won't have to face the Social Security Earnings test in that period, since you won't be claiming Social Security.)

But if you have adequate resources to replace the delayed Social Security check, the next step is to figure out the best way to build a bridge to pay the bills from age 62 (the earliest age you can claim benefits, but which comes with a 30% reduction in benefits) until you turn your benefits on at age 70.

Step 2: Create a systematic withdrawal strategy

This strategy is akin to a typical retirement drawdown plan that pulls from various accounts, such as a 401(k), taxable fund portfolio, and Roth IRA — with the main difference being that Social Security won't be part of the income mix until age 70.

"The most common strategy is a systematic withdrawal strategy," says Andrew Wood, a retirement planning adviser with Daniel A. White & Associates. If you need $4,000 a month, for example, map out a withdrawal strategy that works on autopilot and pulls from one or multiple accounts in a way that best minimizes your tax liability. "You want these (regularly planned) withdrawals to mimic a Social Security check," says Wood.

Step 3: Mind your tax brackets and withdrawal order

When taking withdrawals, be mindful of how much income you're generating to avoid bumping up into a higher tax bracket and paying more in taxes, adds David Kressner, managing adviser at Altfest Wealth Management.

For example, if you're nearing a higher bracket, set up a drawdown system that pulls from a tax-free Roth account, a brokerage account that benefits from lower capital gains rates (married couples with income up to $98,900 pay zero capital gains, and 15% up to $613,700), as well as from traditional 401(k)s and IRAs that are taxed at ordinary income tax rates.

"The idea is to pull from these different pools of money in the most tax-efficient manner," says Kressner. "You could potentially be able to sell some investments and take those profits (to create income) with little or no tax consequences. Selling assets with the largest unrealized gains can give you more bang for your buck" (if the tax impact is nil).

To best manage the tax hit on account withdrawals, make sure you pull from the right account. The most common pecking order is to withdraw from taxable accounts first.

"Taxable assets are the first place to go," says Vendig. Why? The tax hit won't break the bank. If you pull some money from cash or a CD, for instance, you pay zero taxes. If you sell a stock, you might pay zero capital gains.

Next in line are traditional IRAs and 401(k)s. While these withdrawals are taxed at your ordinary income rate, which ranges from 10% to 37%, there are benefits from lowering your account balance.

For example, if you take distributions in years when your income is low, such as in the early years of retirement, you'll be able to take the money out at a lower tax rate.

What's more, pulling money from traditional accounts before age 73 or 75 (depending on your birth year) when required minimum distributions (RMDs) begin means those forced withdrawals will be smaller. That could help you avoid hurdling into a higher tax bracket. "I really like using pre-tax IRA and 401(k) money during the bridge period," says Wood.

Advisers typically recommend withdrawing from Roth IRAs last, as they allow tax-free withdrawals. "We prefer to use Roth IRAs as opportunities for growth in portfolios," says Vendig. If pulling mainly from traditional accounts pushes you too close to the next higher tax bracket, you can add a Roth withdrawal into your overall monthly withdrawal.

"We might take that weighted, blended approach assuming it keeps them in the same tax bracket," says Vendig.

Finally, talk to your adviser about doing a Roth conversion during these bridge years. Ages 62 to 70 are often a sweet spot for conversions, but you'll need to align them with your tax planning.

Step 4: Build steady income streams

The magic of Social Security is that benefits are guaranteed and paid out in monthly installments. Another way to bridge the income gap to age 70 is to create guaranteed income streams on your own, or at the very least, sources of income that can be counted on to deliver consistent income no matter what the financial markets are doing.

Consider an annuity that expires at age 70.

One option to consider is a single premium immediate annuity, says Wood. This is a contract with an insurance company that converts a lump sum into an income stream guaranteed for life or a set period of time.

Since you're trying to bridge the income gap from ages 62 to 70, Wood recommends a "period-certain annuity," which pays out cash flows for a set period, typically five to 20 years. If you're 60, you could convert a portion of your savings to an annuity that pays out for 10 years until age 70. If you're 65, a period-certain annuity of five years will suffice. If the annuitant dies early, payments go to a beneficiary.

Period-certain annuities differ from life annuities, which pay until death, so don't convert them if you want to maintain a death benefit. These annuities provide predictable financial security for a set period. Since the annuity doesn't guarantee payments for life, your monthly payments are higher.

"When the annuity period ends at age 70, you switch over to Social Security," says Wood.

Consider a bond or CD ladder.

Since income is what you're trying to solve for in the years before Social Security kicks in, you can build a fixed-income portfolio made up of bonds that are benefiting from today's higher yields. You could, for example, build either a bond ladder with individual bonds with different maturity dates or a CD ladder that divvies up your cash across multiple CDs with staggered maturity dates.

This laddering strategy gives you regular access to funds while earning higher yields than traditional savings vehicles offer.

"It's a good approach to keep income generation consistent," says Vendig. You can also add income to close the gap by having your dividends on stocks and bonds and mutual funds sent directly to you, rather than reinvesting them.

Now build your bridge to Social Security

The bottom line: With the right "materials" and "blueprint," you can build a solid bridge to that larger Social Security check at age 70. You'll likely need to blend many of the options described above.

"Looking at comprehensive planning, usually it should be a combination of all these strategies," says Wood.

Read More

• Top 4 Retirement Withdrawal Strategies to Maximize Your Savings
• How to Turn a $1 Million Nest Egg Into a Lifetime Income Machine
• What Are Annuities? The Different Types and How They Work
• Average Net Worth by Age: How Do You Measure Up?

Moving your retirement savings from an employer-sponsored 401(k) to an Individual Retirement Account (IRA) is often the result of changing jobs. However, this transition strips away the federal shield of ERISA regulations, exposing your nest egg to hidden costs, aggressive civil lawsuits, and administrative oversights.

True financial security requires understanding these structural gaps — ranging from shifting bankruptcy rules to the vanishing of spousal consent protections — and actively managing your retail accounts, such as IRAs, to replicate the institutional safeguards you left behind. Think your rollover is completely safe? Test your knowledge on how moving your 401(k) into an individual retirement account fundamentally alters your legal rights.

Don't worry if you miss an answer; you can follow the links below the quiz to brush up on your knowledge.

More on IRAs, from the Kiplinger team:

• The $9 Trillion Shift: Why Your Retirement is Less Safe in an IRA and How to Protect It
• Four Reasons to Roll Over Your 401(k) into an IRA (And Four Reasons Not To)
• Is Your IRA Protected from Creditors in Bankruptcy?
• How to Roll Over a 401(k) in Five Steps
• IRA Conversion to Roth: Rules to Convert an IRA or 401(k) to a Roth IRA
• Roth IRA Contribution Limits for 2026

Question: I'm 60, and my husband is 62. He wants to claim Social Security, retire, and start using our $2.4 million nest egg because his parents died in their early 70s. He has a strong case of FOMO (fear of missing out) because he assumes he'll have only another decade left. On the other hand, my parents, grandparents and many ancestors lived into their 90s, so I feel I should plan for longevity. How do we reconcile this?

Answer: Even if you and your spouse manage to align on most financial decisions in life, there's one big one you might disagree on — retirement. It's not unusual for one spouse to feel ready to retire while the other feels it's too soon.

The good news is that you don't necessarily have to retire at the same time as your spouse. But it's important to have a cohesive strategy for spending your nest egg and claiming Social Security.

If you're a 60-year-old female with a family history of longevity, you might be inclined to delay both retirement and your Social Security claim. But if your 62-year-old spouse's parents passed away at a fairly young age, he might be eager to stop working and take benefits at 62 to ensure that he's able to enjoy a few good years of retirement before his health declines.

The problem, of course, is that if your husband wants to start tapping your shared savings, it puts you at risk of running out of money between your family history of longevity and the fact that women generally tend to live longer. If your husband claims Social Security at the earliest possible age of 62, his reduced benefits could become a problem for you later on.

Here's how to land on a solution that allows your husband to embrace retirement without compromising your long-term financial security.

Plan for the longer life, not the average

If you're expecting to live until your 90s and your husband only expects to live until his 70s, you might assume that meeting in the middle and planning for a retirement through your 80s makes sense. But Roger Fishel, independent financial advisor at Roger Fishel Financial, cautions against this approach.

"When one spouse has parents who lived into their 90s, the household plan needs to assume that lifespan, because she will likely be the surviving spouse for a decade or more," Fishel explains. "Building a plan around his life expectancy puts her at risk of running out of money in her 80s or 90s."

Decouple retirement and Social Security

Your husband might be inclined to retire at 62 because that's when retirement benefits first become available from Social Security. But Fishel insists he can do one without the other.

"Separate the 'retire now' decision from the 'claim Social Security now' decision. These are two different choices, and people conflate them," Fishel says.

Fishel recommends that if the husband is the higher earner, he should retire at 62 but wait on Social Security. If you're the lower earner in your household, having your husband delay his claim until age 67 or 70 dramatically increases your survivor benefit, which Fishel calls "one of the most powerful longevity hedges available."

Build a paycheck, not just a withdrawal strategy

When people enter retirement with a notable amount of savings, they tend to focus on finding the right withdrawal rate. Fishel says there's more to it than that.

"With $2.4 million, the goal isn't just picking a withdrawal rate. It's structuring guaranteed lifetime income to cover essential expenses so neither spouse is dependent on market performance to eat and keep the lights on," Fishel says.

In this situation, a portion of that $2.4 million allocated to a lifetime income source could hedge your longevity risk while freeing up the rest of the portfolio for growth and your husband's desire to enjoy retirement now. You might want to consider an annuity, provided you understand the costs and pitfalls.

Acknowledge the emotional driver

Your husband's inclination to retire, claim Social Security, and start tapping your savings at 62 might seem reckless. But Fishel says it's important to understand the emotions driving that impulsivity.

"When a spouse loses parents young, there's often an unspoken urgency to live now," he says.

"That's valid."

However, Fishel says the answer isn't to spend faster. Rather, it's to design a plan that lets your husband enjoy retirement immediately while protecting you. At the same time, it's important to acknowledge your husband's feelings about retirement and spending, and consider those when creating that plan.

Make sure your plan holds up to stressors

When you're planning for longevity and your husband might be looking to tap your savings sooner than you'd like, you need a plan that's resilient in the face of setbacks.

Abigail Gunderson, CFP and senior wealth adviser at Tanglewood Total Wealth Management, says with $2.4 million in savings, the focus should shift from whether retirement is possible to how to make it sustainable and tax-efficient.

Just as importantly, says Gunderson, you need to make sure your plan holds up through different market cycles and potentially 25 to 35 years in retirement.

"A trusted wealth adviser can provide objective guidance by modeling scenarios very concretely with Monte Carlo analysis, Social Security optimization, and survivor income projections that reflect your desired lifestyle and decades of income needs at retirement," Gunderson says.

As she explains, an adviser can model a range of real-life scenarios to show you how well your retirement income plan holds up. If your plan can't withstand certain stressors, whether it's prolonged inflation or challenging market conditions early in retirement (known as "sequence of returns risk"), you can work with an adviser to tweak it as needed.

"Through this process, many couples discover they can retire sooner, enjoy their lifestyle more fully, and still maintain the long-term financial security that gives them peace of mind," Gunderson says.

Fishel agrees.

"The reconciliation isn't a compromise on lifespan assumptions," he says. "It's building a plan flexible enough to honor both realities at once."

Read More

• We Retired at 70 With $4.3 Million. My Wife Won't Spend 'Our Grandkids' Inheritance,' but I Want to Travel.
• We're 59 and Retired With $5.3 Million. We Want to Spend $250,000 a Year Until Medicare and Social Security Start. Are We Nuts?
• We've Reached Our $5 Million Retirement Savings Goal, but at 66, My Husband Still Doesn't Feel Ready.

As we near retirement, we're often told that we'll pay less in taxes once we've retired. But is that always the case?

For some, yes, but for many, I would contend that you'll pay just as much, if not more, in taxes in retirement than you did in your pre-retirement years.

Some people have misconceptions about taxes and retirement. They believe their income will drop significantly but ignore that taxable withdrawals from retirement accounts and other income sources could put them in a higher tax bracket.

Others fail to seek tax advice as they near retirement and don't plan proactively, resulting in the lack of a tax-efficient, long-term distribution strategy.

The complexity of tax laws and how they differ for various accounts and investments is another contributing factor to unforeseen tax liabilities.

Here are some financial aspects of retirement that can lead to a tax trap.

Your lifestyle

Most experts recommend planning to replace 75% to 85% of your pre-retirement annual income to maintain your current lifestyle. While expenses such as commuting or saving for retirement might drop, others, such as healthcare and leisure (travel, entertainment, hobbies, social activities, etc.), often increase.

Without a significant reduction in expenses, you'll need to have an income similar to your later working years, likely keeping you in the same tax bracket.

Social Security

Up to 85% of your Social Security benefits can be taxable, depending on your combined or provisional income, a specific IRS formula used to determine whether Social Security benefits are taxable.

It's calculated by adding your adjusted gross income (wages, interest, dividends, pensions, capital gains and retirement account withdrawals), nontaxable interest (typically, interest from tax-exempt bonds, such as municipal or government bonds) and half the total gross Social Security benefits received during the year.

That combination could create a "tax domino effect" if you withdraw money for living expenses and unintentionally trigger higher taxes on your Social Security.

Here are the income thresholds at which Social Security benefits become taxable:

Medicare

Medicare premiums can increase due to the income-related monthly adjustment amount (IRMAA). That's an extra, income-based surcharge added to Medicare Part B (medical) and Part D (prescription drug) premiums for individuals with higher incomes.

For 2026, single tax filers with a modified adjusted gross income (MAGI) above $109,000 and joint filers above $218,000 are subject to IRMAA. The Social Security Administration uses tax returns from two years prior to determine if the additional fee applies.

Required minimum distributions (RMDs)

RMDs, which for most people begin at age 73 (it's age 75 for those born 1960 or later), could push you into a higher tax bracket. At those ages, the federal government requires people to make withdrawals from tax-deferred, pretax retirement accounts that they built over decades of their working life.

Those accounts include 401(k)s, 403(b)s, 457(b) plans, traditional IRAs, SEP IRAs, SIMPLE IRAs and Thrift Savings Plans (TSPs). The money you withdraw from those funds is considered taxable income.

The potential downside tax impacts of RMDs:

• They could potentially bump you into the next higher tax bracket
• They could increase your taxes on Social Security
• They could also increase your Medicare premiums due to IRMAA

Ways to help reduce the tax trap in retirement

How can you avoid paying unnecessary taxes in retirement? Here are a few strategies to consider.

1. Make Roth conversions (if appropriate).

A Roth IRA might be able to insulate you from future unknown taxes. Roth conversions are moving money from a pre-tax retirement account (such as a 401(k) or traditional IRA) into a Roth IRA.

You pay taxes on the amount you convert in the year you convert; the tradeoff is that you get tax-free growth and in retirement, withdrawals are tax-free. There's no limit on how much you can convert.

A Roth conversion is a popular strategy to help reduce future tax burdens, especially for those expecting higher tax brackets later or wanting tax-free inheritance for their beneficiaries. There are no RMDs for the original owner of the account.

Because Roth withdrawals are tax-free, using funds in your Roth account in retirement can help prevent you from a higher tax bracket.

2. Consider using the low tax window before your RMDs start.

Some people will experience a drop in income when they retire. A prime time to begin withdrawing or converting assets is when you're in a lower tax bracket.

Also consider that the next administration might increase taxes and make it more difficult from a yearly tax-rate perspective for some people to do such withdrawals or conversions.

Along with Roth conversions, here are other strategies to potentially take advantage of the low tax window:

• Consider early voluntary withdrawals. Start taking money out of IRA accounts after age of 59½ to lower the account balance and spread the tax liability over more years, rather than waiting for large, taxable RMDs.
• Balance tax brackets and IRMAA. Target a specific tax bracket in the years between retirement and RMDs to stay below higher tax brackets and avoid Medicare IRMAA surcharges.
• Consider qualified charitable distributions (QCDs). For those age 70½ and older, direct transfers from an IRA to a qualified charity can satisfy upcoming RMD requirements while reducing taxable income, even if you do not itemize deductions.
• "Fill" tax brackets. Purposefully take just enough income from tax-deferred accounts to reach the top of your current, lower tax bracket. You could end up paying less in taxes compared with the higher rates you might face when combined with future Social Security and RMDs.

3. Organize withdrawals by bucket.

In my experience, retirees often pull money from accounts in the wrong order, incurring tax consequences they could have otherwise avoided.

Taking too little from your tax-deferred accounts can lead to huge RMDs later in life. Taking too much early can increase your taxes and, potentially, your tax bracket.

It would be ideal to have a strategy that balances withdrawals from your taxable accounts, IRA (tax-deferred accounts) and Roth, while considering the income from Social Security and pensions.

The order in which you take withdrawals isn't a hard-and-fast rule. A sensible approach is to have three buckets of money:

• Taxable (brokerage accounts)
• Tax-deferred (IRA/401(k), etc.)
• Tax-free (Roth)

Deciding which bucket to withdraw from depends on what's going on in your life at that time.

Let's say you're married and filing jointly in the 12% tax bracket, which tops out at $100,800 of income for the 2026 tax year. Your taxable income for the year was close to that limit. You want to go on a cruise, and it's going to cost $5,000. Should you pull that amount from your tax-deferred bucket? No.

In this example, it may be better to pull it from your Roth because it's not taxable, and that $5,000 is not going to bump you into the next tax bracket.

Portfolio structure matters, especially in retirement.

• Consider placing tax-inefficient investments (e.g., taxable bonds, high-turnover funds) in tax-advantaged accounts, such as IRAs or 401(k)s
• Put tax-efficient investments (e.g., ETFs, index funds, municipal bonds) into taxable brokerage accounts
• Potentially avoid unnecessary capital gains, manage your dividends and distributions, and use tax-loss harvesting to offset capital gains and reduce tax burden

Review periodically and coordinate your plan

A retirement portfolio is not "set it and forget it." Too many things can change year to year, so make sure to review your plan periodically and adjust it as needed.

Keep these priorities in mind when reviewing:

• Income changes
• Market shifts that can affect your portfolio
• New tax laws that can affect your lifestyle, taxation and withdrawals
• Health care cost adjustments
• RMDs and Social Security

Retirement tax planning should be geared toward reducing taxes and avoiding ugly surprises, helping ensure you keep more of what you've worked hard to build and save.

If you're nearing retirement or already retired, it's important to ask yourself: Am I heading toward a possible tax trap in my retirement?

The earlier you spot the tax trap, the easier it may be to avoid and ensure you can retire relaxed and happy.

Dan Dunkin contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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• 7 Tax Blunders to Avoid in Your First Year of Retirement, From a Seasoned Financial Planner
• Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very Likely
• Will Your Retirement Income Trigger the IRMAA This Year? (Plus, 6 Ways to Avoid it in the Future)
• The New Retirement Math: How an Active Lifestyle Can Lower Your 2026 Taxes

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

After months of relative stability, the outlook for Social Security benefits has taken a sharp upward turn. The 2027 Cost of Living Adjustment (COLA) projection has surged to a forecasted 3.8%, down 0.1% from its previous estimate of 3.9%, according to the latest data from the Senior Citizens League. This shift highlights a volatile economic landscape where persistent inflation continues to drive up essential costs for older Americans.

In April 2026, the average Social Security benefit for retired workers stood at $2,081.16, according to the April Monthly Statistical Snapshot from the Social Security Administration (SSA). The average monthly benefit would increase to $2160.24, a rise of $79.08, factoring in a projected 3.8% COLA.

We are about five months out until the official COLA announcement that typically happens in mid-October. A lot can happen until then. We'll be updating this article monthly to account for the new CPI numbers and any changes in the forecast.

The new 2027 COLA projection

The Senior Citizens League is now predicting a 3.8% COLA for 2027. If this projection holds, it would result in an average monthly increase of approximately $79.08 for retired workers. This would raise the average monthly benefit check from the current $2,081.16 to $2160.24.

How the projection has changed. The estimate has seen a small drop of 0.1%. Just a month ago, the projection had jumped from 2.8% to 3.9%. This new 3.8% forecast represents a 0.1% decrease from last month's estimate of 3.9%.

Projected COLA data from The Senior Citizens League. *Their chart shows the CPI at 3.9%; the difference may be due to rounding. We updated the chart to show the BLS number that pegged the increase at 3.8%.

Why the 2027 COLA projection is increasing

High costs for housing, utilities and energy continue to put pressure on the economic indicators. TSCL noted that for many retirees, these essential expenses are rising faster than the rest of the economy.

“For retirees living on fixed incomes, the costs that matter most, especially healthcare, housing, utilities, and insurance, continue to rise faster than prices in the rest of the economy, silently wrenching seniors dry. This makes the national affordability conversation even more important than ever,” said Shannon Benton, Executive Director of The Senior Citizens League.

The May CPI showed that "the index for energy rose 3.9% in May," and "accounted for over 60 percent of the monthly all items increase," according to the Bureau of Labor Statistics. Historically, higher oil prices coincide with rising food prices and broader consumer inflation. As transportation costs for goods increase, those expenses are passed on to consumers at grocery stores and retail outlets.

The TSCL's study, 2026 Loss of Buying Power, asserts that "compared to 2016, Social Security benefits are only worth about 86.3 cents on the dollar," citing COLAs that are too small to keep up with costs. They estimate that "payments would need to rise by 15.7 percent, or $295.85 per month for the average beneficiary, to recover the lost value."

Medicare costs will also go up in 2027

Medicare premiums are usually deducted from monthly Social Security checks. So, for most, the benefits of the annual COLA increase is blunted by increased Part B and Part D premiums.

The 2026 Medicare Trustees Report projects a steady increase in Medicare Part B premiums and IRMAA surcharges over the next eight years. The projections are based on expected rises in healthcare costs, particularly for outpatient hospital services and physician-administered drugs.

The report estimates that the standard monthly premium for Medicare Part B will potentially reach $360.60 by 2035. If the estimates are accurate, the Part B premium is expected to increase by 77.7% by 2035 compared to the 2026 level of $202.90.

Here is a table with the projected standard monthly premiums for 2027:

The Part D deductible ($700) and Part D catastrophic threshold ($2,400) for 2027 have been finalized.

How you can increase your monthly Social Security benefits

One way to increase your monthly Social Security benefit is to delay claiming your check until age 70. You receive an extra 2/3 of 1% for each month you delay after your birthday month, and you can further increase your benefit up to 8% for each full year you wait until age 70. If you wait until 70, your monthly benefit is 24% to 28% higher than if you started to collect benefits at your full retirement age (FRA).

Collecting benefits before your FRA can lead to a permanent decrease in your benefits. If you were born in 1960 or later, taking benefits at 62 would reduce your check by 30%, and spousal benefits would be reduced by 27.5% to 35%.

Related Content

• 2026 Social Security COLA is 2.8%: What You Need to Know
• What's My Social Security Full Retirement Age?
• When Will Social Security Run Out of Money? And Medicare?
• What You Will Pay for Medicare in 2026
• Projected 2027 IRMAA Brackets and Surcharges for Medicare Part B and D
• Your Medicare Costs Are Set to Soar: What to Expect Over the Next Decade

Turning 65 is more than just a personal milestone; this particular birthday also triggers some of the most important financial "deadlines" of your life. From the narrow seven-month window for Medicare enrollment to the implications of the age at which you claim Social Security benefits, the decisions you make this year will impact your lifestyle for decades to come. This 10-question quiz is designed to help you navigate these complex rules and ensure you aren’t leaving money — or health coverage — on the table.

Test your knowledge to see if your transition plan is as solid as it needs to be. Don't worry if you miss an answer; you can follow the links below the quiz to learn more about the importance of turning 65.

More on turning 65, from the Kiplinger retirement team:

• Turning 65 This Year? Here Are 10 Key Things To Know
• The 7-Month Deadline That Determines Your Lifetime Medicare Premiums
• Can You Sign Up for Medicare While Still on an Employer Health Plan?
• When To Take Social Security Payments: Your Age Matters
• What's My Social Security Full Retirement Age (FRA)?

The most stressful Social Security meetings I have aren't about whether 62, 67 or 70 is "best."

They're about the week someone planned to file … and suddenly can't.

A few months ago, a client — let's call him Jeff — called me from the back seat of an Uber on the way to Chicago's O'Hare airport. Jeff and his wife are the kind of people who do retirement the way they do travel: With spreadsheets, backups and confirmed reservations.

Their Social Security claiming strategy was intentional. They had a date circled on the calendar. They had income lined up. They were ready.

"My plan is solid," Jeff said. "But I'm locked out of my Social Security account. I can't get my estimate. And, Ray, we're boarding in two hours."

That's when it hit him: Social Security isn't only a math problem. It's also a logistics problem.

Right now, logistics can be the difference between a smooth claim and a stressful scramble.

The new reality: Claiming isn't a switch — it's a process

Most people assume Social Security works like flipping a switch: Decide, file, get paid.

In reality, there are several points at which people get stuck, especially if they wait until the last minute:

• Account access issues. You can't sign in, can't recover, can't verify.
• Identity verification hurdles. Extra steps, mismatched information, repeated prompts.
• Direct deposit changes and security rules.
• Processing friction. When documents or spousal/survivor details come into play.

The good news is you can prevent most of this. Think of it as an "SSA readiness" protocol — done while you're calm, not while you're under pressure.

Jeff's mistake wasn't his strategy. It was assuming strategy automatically turns into a clean claim.

Step No. 1: Create (and test) your online access now — don't wait until filing month

If you haven't logged into your "my Social Security" account recently, don't assume it will be easy when you need it most.

Social Security has transitioned online account access so that Login.gov and ID.me are the sign-in options for online services. If you created your account a long time ago and haven't used it in years, the "dusty old password" plan can fail at exactly the wrong time.

Practical move:

• Set up (or transition) your access now
• Sign in again a week later to confirm you can still get in
• Make sure your recovery methods (email/phone) are current
• Save backup codes somewhere secure

Jeff's situation wasn't unique. It's what happens when you discover — mid-Uber ride — that your account security settings were built for the person you were three phones ago.

Step No. 2: Do a quick earnings-record scan early

Execution risk isn't only login trouble. It's also discovering — too late — that something in your earnings record is off.

You don't need to audit 50 years of earnings. You just need a fast scan for obvious red flags — then you investigate only the years that look wrong.

Here's how you can quickly check things out: First, log into your "my Social Security" account and pull up your earnings history. That's the record SSA uses to calculate benefits. Look for red flags, such as:

• Zero years after you started working. If you worked that year and the record shows $0, that's a high-priority flag.
• Cliff-drop years. One year far lower than the years right before and after (and you didn't take time off) deserves a second look.
• Recent-year missing wages. If the current year — or even the prior year — looks missing, it might simply not be posted yet. Don't panic; check again later.

SSA earnings issues usually come down to a few repeat problems:

• Wrong name/SSN used by the employer. Even if the wages were correct, a mismatch can keep them from landing on your record.
• Name change not updated. Marriage/divorce name changes can create a mismatch if SSA doesn't have your current legal name.
• Employer reported the wrong amount or wrong year. This can show up as a year that is "there" but noticeably too low (or too high).
• Earnings reported under an SSN that wasn't yours. Sometimes it's a clerical error; sometimes it's misuse. Either way, your record can end up missing wages.

There are 'high-income household' situations that need extra attention:

• Self-employment years. SSA credits self-employment based on what was reported on your tax return as net earnings subject to self-employment tax. If a self-employment year looks too low, pull that year's return and confirm the relevant schedules were filed correctly.
• S corp owner years. Only wages subject to Social Security payroll tax count toward your Social Security record. Distributions generally aren't wages. It's possible to have a financially great year and still show relatively low covered earnings if wages were kept low.
• Overseas work years. If you worked abroad, you might have paid into another country's system instead of U.S. Social Security, which can legitimately produce "missing" U.S. covered wages for that period. Those years could still matter for eligibility under certain international coordination rules — but they won't always appear as U.S. Social Security wages.

If you identify a problem year, gather proof for that year only (W-2s, paystubs, tax returns). Then contact SSA, and be prepared to document the specific year(s) that look wrong.

One formal route SSA provides is Form SSA-7008 (Request for Correction of Earnings Record).

Step No. 3: Build a 'claiming kit' folder before you need it

A clean claim is easier when the basics are already in one place. The friction points usually aren't complicated — they're just inconvenient when you're in a rush.

Create one folder (digital or physical) that includes:

• Social Security numbers and basic ID info
• Marriage/divorce documentation (if it applies)
• A list of past names used (important for mismatches)
• Banking information for direct deposit
• A one-page summary of your claiming plan (target start month and why)

You're not trying to become your own Social Security office. You're simply removing avoidable delays.

Step No. 4: Treat direct deposit like a security decision, not a checkbox

When Social Security payments go wrong, it's often because direct deposit information changes — sometimes legitimately (new bank), sometimes fraudulently.

SSA has tightened protections around direct-deposit changes, and identity proofing is now a bigger part of the process than many retirees expect.

Here's a move most people don't know exists: SSA offers a Direct Deposit Fraud Prevention block. When it's placed on your record, it prevents anyone — including you —from enrolling in or changing direct deposit (and even changing an address) through my Social Security or through certain automated channels.

Removing the block requires contacting your local office.

That block isn't for everyone. But it's worth considering if you're:

• A frequent traveler
• Helping an older parent manage benefits
• Concerned about account takeover or phone scams
• The type who rarely changes banks and wants maximum lockdown

At minimum, if you change banks, don't do it casually. Build in time, confirm changes, and monitor the next deposit.

Step No. 5: Use the four-month window — don't turn filing into an emergency

One of my simplest rules: Don't file in the same month you want everything to start — unless you enjoy adrenaline.

Social Security allows you to apply for retirement benefits up to four months before you want benefits to begin. Use that window. It creates breathing room if anything gets stuck.

If you're coordinating spousal benefits, traveling, working while claiming or juggling multiple moving pieces, that cushion matters even more.

Step No. 6: Put your milestone timeline on the calendar now

Mass affluent retirees plan travel, family events, and lifestyle changes with precision — then treat Social Security like a casual errand.

Instead, calendar the milestones:

• The month you want benefits to start
• The date four months before that month (your early-apply window)
• Age 65 (Medicare planning overlaps with retirement timing)
• Full retirement age (where several rules change)
• 70 (the end of delayed credits)

The point isn't to file early. The point is to avoid a calendar collision at which Social Security becomes an emergency project — as it did for Jeff at O'Hare.

Step No. 7: Create a 'no surprises' plan for problems

If you get stuck, don't assume it's just you. The system has real friction.

Your best protection is to decide in advance:

• Who can help you (spouse, adult child, adviser)
• Where your documents live
• Whether you want in-person help (and how you'll schedule it)
• How you'll handle travel during your filing window

Jeff's call ended the same way most do: not with panic, but with a plan — after the panic taught the lesson.

The bottom line

A great claiming strategy is like a great itinerary. It looks perfect on paper — until you realize your passport has expired, your login doesn't work, or the one document you need is in a safety deposit box you can't access.

Do the SSA readiness work while you're calm:

• Get access
• Do the earnings-record scan
• Organize your claiming kit
• Secure direct deposit
• Use the four-month filing window

When it's time to claim, you'll do what most retirees actually want: File smoothly, get paid on time and move on with your life.

A final thought (and when to get help)

Jeff didn't need a better strategy. He needed better execution — before the week it mattered.

That's the point: Social Security isn't a decision you "try out." You make it once, and the checks can last for decades.

If your situation is more complicated than a straightforward single-person claim — spousal or survivor benefits, a divorce history, foreign work, self-employment years, multiple name changes, a tight travel window — consider having a specialist stress-test both the strategy and the execution before you file.

A short review now can save you weeks of frustration later — and can help prevent a paperwork problem from turning into a permanent benefit problem.

If you need assistance, my team at Social Security Claiming Experts helps households (and their advisers) run these claiming plans end-to-end, so the math works and the filing goes smoothly.

Related Content

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• The '8-Year Rule of Social Security' — A Retirement Rule
• How to Apply for Social Security Online or In Person at Any Age
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• Don't Let Low Tax Rates Lull You Into the Torpedo Zone: If You Have $1M to $3M in Tax-Deferred Savings, You Could Be Looking at Brutal Tax Bills in the Future

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Is your income safe from taxation this year? As we approach the midway point of 2026, you might be thinking about next year's income tax bill already.

The 2025 Trump tax bill has made headlines by making certain tip income and overtime pay "tax-free" via new deductions.

At the same time, other income — like credit card referral bonuses, small gambling winnings, or even certain life insurance payouts — could still trigger a bill. Even a simple gift might have hidden strings attached.

So how do you know what's considered federally taxable in 2026? Take our scenario-based quiz to see if you're ahead of the curve or headed for a surprise.

Note: This quiz covers federal income tax policy only. State laws may vary.

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The average retirement age is around 62, but if you stop working then and begin collecting Social Security benefits, your monthly payments can be reduced by up to 30% over your lifetime.

That could be a big deal later in life if you need extra money to cover your healthcare or to assist you in your daily tasks.

One way to ensure you get the most Social Security benefits is to delay filing. That doesn't mean you can't retire. It does mean you have to find other sources of income to bridge the time until you're eligible for all your Social Security benefits.

Call it the "Wait-to-Win" rule of retirement spending. With it, you trade some savings today to secure a higher, inflation-protected, permanent raise tomorrow. The longer you wait to start collecting Social Security, the more you stand to get.

Every year you delay collecting beyond your full retirement age (FRA), which is 67 for those born in 1960 or later, you'll get an 8% bump in your annual payments.

"It could be a powerful strategy but also a very selective one," said Quincy Goudeau, wealth adviser and founder of Goud Steward Advisors. "Most people thinking through whether or not to do it have to consider if they have longevity in their family and the financial flexibility."

The 'Wait-to-Win' rule in practice

Consider the following scenario as an example of the impact the "Wait-to-Win" rule of retirement spending can have on monthly cash flow. Our example assumes the average Social Security monthly payment by age, keeping in mind that every situation is unique.

Who wouldn't want an extra $1,125 per month in benefits?

It's not for everybody

Despite the larger benefit from delaying, the "Wait-to-Win" strategy isn't for everyone. It works best for retirees with enough savings to last until their full retirement age and who don't have serious healthcare issues that could affect their lifespan. After all, what's the point in delaying collecting Social Security benefits if you aren't around to use them?

It's also not for those who'll lose sleep worrying that Social Security will go bankrupt in the years to come. While that isn't likely to happen, the Old-Age and Survivors Insurance Trust Fund, which pays Social Security benefits, is projected to run out of money in the first quarter of 2032. If nothing is done by then, benefits would be cut by 23%, and beneficiaries would receive 77% of their benefits.

"I have been doing this for 20 plus years, and I've had this conversation 20 years ago, and it's still being had today," says Goudeau. "It is hard for me to believe that any party or any politician will vote to end Social Security or change it dramatically."

Use the 'Wait-to-Win' rule if you think you'll live long

If you have a family history of living well into your 90s, this strategy can give you peace of mind knowing you'll have a higher level of inflation-protected steady income throughout your lifetime. You won't have to worry about running out of money as you age or relying solely on your own savings to fund your later years.

Let's assume you earn the maximum Social Security benefits and claim at 62, 67 or 70. This graphic from J.P.Morgan Asset Management shows how you could receive up to $500,000 more in your lifetime as a maximum earner and with a lifespan of 90 years. It also demonstrates the "breakeven point," in other words, how long you would need to live for the higher monthly benefit to offset the payments you skipped by claiming late.

As the graphic shows, it is also important to account for your spouse's Social Security strategy and potential lifespan.

"With this, you give yourself a raise when you need it most," says Steve Parrish, professor of Practice, Retirement Planning at The American College of Financial Services. "Even though you are in the slow-go years, it's insurance in case you have to go into assisted care or your healthcare costs go up."

The strategy complements working in retirement

"Wait-to-Win" also makes sense if you plan to consult or work part-time in retirement, since Social Security penalizes you if you earn more than a specific amount per year in retirement before you reach full retirement age. For 2026, the cap is $24,480. After that, for every $1 you earn, you lose $2 in benefits.

The loss is temporary. Once you reach full retirement age, Social Security recalculates your benefits. By waiting until your full retirement age to claim, you bypass the earnings test entirely. You get to keep every dollar of your paycheck and secure your higher, lifetime Social Security benefit.

There's also a tax benefit to this approach, noted Parrish. It can help you avoid the so-called tax torpedo, which occurs when you have to pay taxes on a portion of your Social Security when your income in retirement exceeds more than $34,000 for single filers and $44,000 for those filing jointly. Without Social Security, you might not have to worry about that, he says.

There's no right or wrong approach

Deciding when to claim Social Security is one of the biggest decisions you'll make in retirement. The "Wait-to-Win" strategy can help you have a bigger permanent paycheck later, but it does come at a cost early on.

For some, claiming early is the right choice because it provides the immediate cash flow needed for a comfortable, active retirement or peace of mind during health challenges. For others, holding off is a strategic move that turns savings into long-term insurance against outliving their money.

Your cash flow, savings, longevity and risk tolerance all come into play when determining which approach is right for you.

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When people ask when to claim Social Security, the conversation usually starts with math. Claiming at 62 locks in a permanently smaller check, while waiting to 70 increases monthly benefits and builds a larger inflation-adjusted income stream for life.

Most advisers and do-it-yourself retirees translate that trade-off into one practical question: How long do I need to live for delaying to pay off?

Depending on the assumptions used, break-even points often land around age 80 when you compare a claim at 70 versus full retirement age, and in the early 80s when you compare 70 versus 62.

Broad longevity data makes those ages plausible. The Social Security Administration's 2022 period life table shows a 70-year-old man has a remaining life expectancy of about 14.1 years and a 70-year-old woman about 16.3 years, putting the averages in the mid-80s.

Even with that context, many people still claim early, and the explanation for doing so usually sits outside the spreadsheet.

Recent research helps shed light on the issue by framing claiming as a decision shaped by client preferences around spending and security — not just a calculation designed to maximize lifetime dollars.

A strategy can look "suboptimal" on paper and still fit the way a household experiences retirement, particularly when comfort and follow-through matter as much as the break-even point.

A framework built around real preferences

In a recent paper, Revisiting the Social Security Claiming Puzzle: Behavioral Preferences as Rational Explanations for Early Claiming, Derek Tharp, PhD, from the University of Southern Maine, analyzes Social Security claiming using a utility-based framework that builds in three behavioral preferences that show up in retirement decisions.

The framework incorporates front-loaded consumption, meaning some retirees place more value on spending in the early, active years of retirement.

It also incorporates source-dependent utility, where people feel more comfortable spending from a steady income stream than selling investments.

A third factor is claim-retire linkage, where retirees prefer to claim when they retire instead of managing a separate bridge period.

When those preferences are included, the model can point to earlier claiming ages for some households, including those with substantial assets, because the "optimal" strategy shifts once the inputs reflect how people actually prefer to spend and draw from wealth.

This framing is useful for advisers because Social Security sits in a unique category. It is one of the few retirement decisions that can create a guaranteed, inflation-adjusted income stream for life, and the client's comfort with the plan often determines whether they will carry it out through the bridge years and into later retirement.

Start with the math, then test the assumptions that drive behavior

A break-even analysis remains a good entry point for claiming decisions because it clarifies the trade-off in plain terms.

However, it usually needs a second layer that tests whether the assumptions behind the "optimal" strategy match the client's real preferences.

Discounting is one of those assumptions. A dollar at age 62 can have more value to a household than a dollar at 70 because it supports flexibility, reduces near-term stress, or preserves a sense of control. Therefore, two households can look at the same breakeven chart and reach different conclusions for valid reasons.

The decision set also deserves more realism than the typical "62 versus 70" framing allows. Many people claim at full retirement age. But some claim early because their work ends earlier than planned. Others delay because they continue working, do not need the income yet, or want stronger survivor protection.

The conversation tends to get clearer when the plan is built around the client's most likely path, rather than forcing the client into a simplified comparison that never really fits.

Three questions that help surface the right claiming age

A short set of preference checks can reveal whether delaying benefits is likely to feel sustainable or whether it is likely to create friction that undermines the plan.

1. Do you expect spending to be higher early in retirement?
Spending is rarely flat across retirement. Many households spend more in the first phase when health and energy support travel and activity, then slow down and may spend more again later if health care needs increase.

When a client strongly values the early years, earlier claiming can support that spending pattern by reducing the need to treat the first decade of retirement as a holding period.

One prompt that tends to work well in meetings is: "Do you want your plan to support more experiences in the first phase of retirement, or do you want to emphasize higher guaranteed income later?"

The answer changes the structure of the recommendation and sets expectations around what the client is trading.

2. How do you feel about spending principal?
Many retirees treat "income" and "principal" differently even when the dollars are interchangeable. They might spend a Social Security check, dividends or interest with little hesitation, while feeling real discomfort about selling shares or watching an account balance decline. That discomfort can shape behavior in meaningful ways.

A delay-to-70 plan often assumes steady portfolio draws during the bridge years, but a client who dislikes selling may respond by underspending during that period even if they can afford to spend.

In that situation, the plan may deliver a larger check later at the cost of a smaller life earlier, and that may not be the trade-off the client intended to make.

Two precise questions that can surface this quickly are: "When you think about selling investments to fund retirement, does it feel routine or does it feel like giving something up?" and "Would a larger Social Security check later increase your willingness to spend today, or would you still prefer to keep spending tight?"

3. Do you mentally connect retirement and claiming as one milestone?
Many people view claiming as the start of retirement even if they retire earlier. They want a single starting line and a simple rhythm to the plan. Tharp treats this claim-retire linkage as a real preference, not a planning error.

This preference affects follow-through. A recommendation built around retiring at 62 and delaying benefits until 70 can create ongoing discomfort if the client experiences the wait as unfinished retirement, which can turn the bridge years into a long exercise in restraint.

A straightforward test question often clarifies the issue: "If you retire at 62, would waiting several years to claim feel fine, or would it feel like retirement has not fully started until benefits begin?"

A strong Social Security recommendation usually combines the break-even math with a clear read on the client's preferences around early-retirement spending, portfolio drawdowns and simplicity.

When the strategy fits how the household actually behaves, clients are more likely to stick with it.

Ideally, Social Security can then support a steadier spending rhythm and a retirement plan that feels workable over decades.

The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a financial professional. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

"Can I borrow money?"

It’s not an uncommon question. But when it comes from a parent, it can stop you in your tracks.

Growing up, money typically flows one way: parents help kids. So when the direction flips, even for understandable reasons, it can feel disorienting. It’s like a bad version of opposite day.

When my mother and stepfather hit a rough financial patch, I did what I could. Family is family, after all. That moment didn’t make me judge their decisions. But it has made me think more seriously about my own.

Many people their age, baby boomers, would admit to making mistakes. A recent Nationwide survey found that 55% of recent retirees say they have regrets about how they saved for retirement. More than a quarter wish they had started earlier, and 13% wish they had contributed more each year.

We’re told to honor our parents. That’s good advice for most things, just maybe not always when it comes to money. Here’s where I plan to take a different path.

Retirement was the plan. Planning wasn’t.

My mother and stepfather are both past traditional retirement age — and still working.

There are positives to that: purpose, routine and staying active. But underneath it lies a more practical reality: a lack of retirement preparedness.

As Lawrence Pon, CFP® and founder of Pon & Associates, puts it: “The most common retirement planning mistake is not retirement planning.”

In fact, only about 40% of boomers are considered “retirement ready,” according to Vanguard, and those tend to be higher-income households.

The issue isn’t just whether people saved. As Pon explains, it’s whether they consistently took advantage of the tools available to them – things like employer matches, maximizing retirement plan contributions, catch-up provisions and other tax-advantaged accounts, such as health savings accounts.

Individually, these decisions don’t seem dramatic. Over decades, they are.

In fairness, my parents’ generation lived through the shift from pensions to self-directed retirement accounts (not to mention 16% mortgage rates in the 1980s). The system changed, but the mindset didn’t always keep up. So some people operated as if things would work out on their own. For many, they didn’t.

What’s interesting is how that mindset may be shifting. The Northwestern Mutual 2026 Planning & Progress Study found Gen Z to be the most confident generation, with 58% expecting to be financially prepared for retirement, while millennials are roughly in line with boomers at 55%. That likely reflects greater access to information, tools and investment options.

For me, the takeaway is simple: retirement isn’t a finish line. It’s a long phase of life that requires ongoing attention and not something to figure out later. Or put another way: what you delay now doesn’t disappear. It just shows up later.

Treating Social Security like a discount coupon

Without enough saved for retirement, the pressure is often to claim Social Security early. That’s exactly what happened in my parents’ case, as well as in many households.

According to Northwestern Mutual, more than a third of boomers plan to claim benefits as soon as they’re eligible at 62, even though it permanently reduces their monthly income.

Claiming early can cut benefits by roughly 30% compared to waiting until full retirement age. On the flip side, delaying benefits increases them by about 8% per year up to age 70.

"Many people don’t realize how quickly they reach the breakeven threshold where they have gotten more out of the system by waiting than claiming early," says Patrick Fontana, CFP® and founder of Fontana Financial Planning.

There are situations where claiming early makes sense. But broadly speaking, this is one of the most important financial decisions people make and one of the easiest to get wrong.

"It’s really meant to be longevity insurance," says Natalie Pine, CFP® and managing partner at Briaud Financial Advisors. "For most couples, especially if one spouse earned more, it often makes sense to delay until 70. The real risk isn’t dying early. It’s living a long time and running short."

I can’t say with certainty what my circumstances — or that of the program itself – will be when I become eligible. But my goal now is to delay as long as possible for the credit rather than the discount.

Not getting an outside perspective

In my family, there was an implicit belief that things were being handled. My stepfather worked in finance, so the assumption — spoken or not — was that expertise in one area translated to a complete plan.

But retirement planning involves many moving parts. And once you factor in behavior, taxes, income strategy and long-term decision-making, it becomes clear that it’s often better to have a qualified outside perspective.

A 2025 Gallup survey found U.S. adults are most likely to turn to friends and family (43%) or financial advisers and planners (41%) for financial guidance. But the issue isn’t just whether you seek help, it’s whether you’re getting the right kind.

"A lot of people default to someone they know locally or someone focused only on investments. But retirement planning is bigger than that," Pine says. "A fee-only, fiduciary planner who looks at the whole picture tends to lead to better outcomes."

Read: How to Find a Financial Adviser for Retirement Planning.

Talk to my kids about money before someone like MrBeast does

I don’t remember many real conversations about money growing up. At least, not beyond the standard noncommittal responses when asking to buy something, like "we’ll see" or "maybe next payday." (Some of which, I’ll admit, I now use with my own kids.)

Part of that is generational. For many in my parents’ age group, money has long been a taboo topic. Though that’s starting to change. A Bankrate survey found that only 33% of boomers feel comfortable sharing their bank account balance with family or close friends, compared to 41% of millennials and 52% of Gen Z.

But keeping money conversations close to the vest can create problems for families later.

As Pine puts it: "Another mistake is simply not talking about money as a family. You don’t need to share every detail, but explaining your values and decisions can prevent confusion or even conflict later on."

This goes beyond estate planning. It’s also about making sure my kids are prepared to make good financial decisions.

If I had to guess, younger people today are far more comfortable sharing financial details because they are exposed to more conversations about money, from social media to podcasts. Even MrBeast has entered the financial space with a money app.

Nothing against MrBeast, but I’d prefer to get there first. That’s why money now comes up in our house beyond just shopping. It includes budgeting, the importance of investing and how to make decisions with it.

Yet, I know every generation tends to critique the one before it. So if history is any guide, I won’t be surprised to read one day something my kids have written about the financial mistakes I made — and how they plan to avoid them.

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Question: We are early retirees at 59, with $5.3 million saved. We need $250,000 a year from savings right now to do everything we want. That number will drop significantly once Medicare and Social Security kick in. Is this withdrawal plan safe for a few years, or will we risk our retirement security for a few years of fun?

Answer: Once you reach a certain level of wealth, it's natural to want to retire and enjoy life without the constraints of a job. And if you're a 59-year-old couple with $5.3 million saved, you may be in a perfectly good position to stop working and start living it up.

But retiring at 59 poses some challenges. For one thing, you're too young for Medicare, so you'll need to bridge what could be a costly healthcare gap until you turn 65.

At 59, you're also too young for Social Security. And if you want your benefits without a reduction, you'll need to sit tight until age 67, which is your full retirement age. That means you may be fully reliant on your portfolio for eight years until those monthly checks begin.

In a situation like this, it's important to manage your spending carefully early on in retirement. But those early years are also when your health may be strongest. And if so, you may want to use that time to travel and do other things that are on the more expensive side.

You may be wondering if a $250,000 annual budget is safe for you, keeping in mind that your spending may drop at 65 once you can switch over to Medicare and you won't have to tap your portfolio as much once Social Security begins. The answer is, it may be a safe plan in theory, but you need some guardrails in place.

The plan generally works

You'd think pulling $250,000 a year from a $5.3 million portfolio would seem reasonable. But it's important to be mindful of your withdrawal rate.

"A $250,000 withdrawal on a $5.3 million portfolio comes out to just under 5%, which is relatively high for a long-term retirement plan, especially when taking in consideration inflation and taxation," says Osman Minkara, Founder and Managing Director of CIG Capital Advisors.

However, Minkara calls that rate "reasonable" due to it being temporary.

"What makes this situation different is that spending is expected to drop once Social Security and Medicare begin," he says. "If that reduction is meaningful and predictable, the portfolio is not being asked to sustain a 5% withdrawal rate indefinitely, which improves the outlook."

The average monthly Social Security benefit for retired workers today is $2,076.41, which amounts to roughly $25,000 a year. For a couple where both spouses worked, that translates to about $50,000 annually.

Given that you've managed to save $5.3 million by age 59, you may be eligible for even larger Social Security benefits, which could reduce portfolio strain significantly. But even $50,000 a year in Social Security means you only need $200,000 annually from portfolio withdrawals if you maintain that $250,000 annual budget. That's about a 3.8% withdrawal rate, which is much safer over the long term.

An early market downturn is the biggest risk

It's not uncommon to want to spend freely early in retirement. But Minkara warns that a market downturn early in your retirement could quickly derail your plans.

"The biggest risk here is not the withdrawal rate itself, but what happens if markets decline in the first few years," he explains. "High withdrawals combined with early losses can create lasting damage to the portfolio, even if markets recover later.”

Minkara says a good way to mitigate that risk, called "sequence of returns risk," is to separate short-term spending from long-term investments. He suggests setting aside a few years' worth of cash or diversifying with low-risk assets to avoid locking in major portfolio losses.

"This allows the rest of the portfolio to stay invested and recover through market cycles instead of being drawn down at the wrong time,” he explains.

Be mindful of taxes

If you and your spouse managed to accumulate $5.3 million, it means you may have been higher earners who are accustomed to a certain lifestyle. And if so, a $250,000 yearly budget may be necessary to help you maintain what you're used to.

But Evan Drury, Financial Advisor at Gateway Financial Partners, says the big question is whether your $250,000 budget is gross or net of taxes. And if $250,000 is what you need after taxes, the numbers don't work nearly as well.

"Assuming no other income is earned in the years you use this strategy, then you'd likely have to take out an additional 20% to cover the taxes you would pay for these distributions," Drury says.

All told, you may actually be looking at $300,000 in annual distributions, which is around a 5.6% withdrawal rate. In Drury's mind, that's "higher than any sustainable withdrawal rate."

Of course, you may have considered taxes in your plan. If your $250,000 budget accounts for taxes (meaning, you'll pay your share out of those $250,000 withdrawals), you're in better shape. Or, it may be that you have a Roth IRA or Roth 401(k) and therefore don't have to worry about paying taxes on withdrawals.

But all told, Drury says it's important to factor taxes into your annual budget. If you're withdrawing from a taxable account, he says, you may also be looking at capital gains taxes.

His advice? "Make a financial plan that considers all of this so you can see real assumptions with inflation and taxes built in, and then how your life looks under each scenario."

It's all about planning

Ultimately, Minkara says, "This strategy works if done for a specified period." But it's important to be mindful of market conditions even once your withdrawal rate drops as Social Security kicks in.

If you put the right guardrails in place early on and are willing to be flexible with spending as needed, there's a good chance your portfolio won't run out on you, even if you're tapping it somewhat aggressively for a good number of years.

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Claiming your Social Security benefits is one of the most important decisions you can make in retirement. It's a decision that lasts the rest of your life, with little room for do-overs.

It's not just the regret of making a poor choice with your hard-earned Social Security that could cost you, but it's real dollars at stake.

A 2022 study by Larry Kotlikoff estimates the average couple misses out on $182,370 over their lifetimes because of poor Social Security decisions.

Before you get ready to file for Social Security, make sure you've made all five of these smart moves so you can make the best decisions for you (and your spouse).

1. Verify your earnings record

Your Social Security benefit is based on your top 35 years' earnings. It's your money, but Social Security makes the calculation, and you'll want to make sure they got their math correct.

Before you file, log in to SSA.gov to review your full earnings record. You should be able to see every single year of your Social Security and Medicare earnings. Your Social Security earnings may be less than your Medicare earnings if you maxed out the Social Security wage limit for that year.

While your earnings record is most likely correct, if you notice a discrepancy, or have a question, contact Social Security right away so you get the Social Security benefit you deserve.

2. Estimate your benefit with the retirement calculator, not your Social Security Statement

Most people log in to Social Security, click on their Social Security Statement and base their retirement projections on their age-62-to-70 benefit amounts listed there — especially their full retirement age (FRA) estimate.

These age-62-to-70 estimates on your statement are based on assumptions that Social Security makes — assuming you keep earning last year's reported income until the specific year you start your benefit.

If you plan to retire at 60, and you're basing your estimates on your age 67 FRA amount shown on your statement, that estimate is based on seven years of earnings you don't plan to have.

With Social Security's benefit formula being based on the top 35 years' worth of earnings, that seven years of missing earnings could mean your actual benefit is 20% lower than the estimate on your statement.

That's where the retirement calculator comes in. You can use it to plug in assumptions based on your planned retirement dates.

It will already have last year's earnings plugged in, assume you retire at your FRA (67 for anyone born 1960 or later) and show your benefit at an early retirement date, your FRA and the delayed benefit at the maximum age of 70.

Most people move their retirement age around, from ages 62 to 70, to see how their benefit changes. I'd encourage you instead to start with changing your average future annual salary that goes into the estimate.

3. Discover how much Social Security benefit you've already earned

First, make note of your FRA amount with the assumptions already in the calculator.

Then change your average future annual salary estimate to $0.

Which sounds odd — why would you assume no future earnings when you're still planning to work?

With no future earnings going into the estimated retirement benefit, the calculator will then show you how much Social Security benefit you've already earned from all your past earnings.

I call it your vested Social Security benefit, because it's the amount you've earned even if you never work another day in your life.

It's important to know both how much Social Security you've earned and the difference between that amount and Social Security's default assumption that you'll keep making last year's earnings until your FRA.

While it's not exact, if the difference is $300 a month and you have 10 years until your FRA, then, roughly speaking, every year you keep working adds only $30 a month to your future Social Security benefit amount.

I've seen differences between the vested amount and the estimated benefit that equate to just $1 to $2 more per month in Social Security benefits for working another 10 years.

Learning how much each additional year of working will grow your Social Security benefit, or not, will be helpful as you determine your planned retirement age.

4. Understand your longevity before you make your Social Security decision

People often say to me, "Delaying Social Security has a break-even age of 77. What are the odds I'll make it to that age?"

Then they shrug as if it's impossible to know the odds. My response is always, "Let's go find those odds."

Your decision on when to take Social Security is basically a bet on how long you, and/or your spouse, might live.

Unlike in a Vegas casino, where they know all the odds and tilt them in their favor, you can walk into the Social Security office knowing more about your odds than "the house" and you can tilt your Social Security bet in your favor — if you bother to take five minutes to learn your odds.

I've found that Longevityillustrator.org is the quickest, easiest way to get both your longevity estimate and your actual odds of making it to certain ages.

Within five minutes, you'll have accurate estimates based on your age, gender, smoker status and general health level.

While you may be focused on your individual life expectancy and that of your spouse if you're married, I'd encourage you to pay special attention to two specific areas in the report.

The first is the section titled "Probability of Living at Least a Specified Number of Years After Retirement." When you're wondering, "What are the odds of making it past the Social Security break-even age," this section will tell you.

The second only applies if you're married. Check the life expectancy for you as a couple, which is not your life expectancy or their life expectancy, but the 50% probability that either of you makes it to a certain age.

You'll notice that it's a number that's likely four to five years higher than either of your individual life expectancies.

I explain it this way: If your life expectancy is the 50% chance that you'll make it to a certain age, then — on average — one of you will pass before that age and one of you will make it past that age.

Finding the joint life expectancy is vital for making the decision on when to file for the higher benefit in a couple. It's this benefit that will go on to the surviving spouse. It's this benefit that will last the longest, and you need to know how long that benefit might last.

5. Follow the math to file for Social Security at the right time

Chances are you've already plugged your Social Security estimate into a spreadsheet and calculated how it changes if you file before, or after your FRA.

You probably have a formula calculated that shows you the break-even age or even the difference between filing early and investing your Social Security benefit vs allowing your benefit to grow by delaying.

Following the math that you found in the first four smart moves isn't about adding numbers. It's about having the right approach to your Social Security decision.

The first part of the approach is coordinating your Social Security decision with how it affects your taxes, your investments, your surviving spouse and the size of your future estate.

The key is not to solve the Social Security decision. The key is to solve how your Social Security decision fits into your retirement planning puzzle.

I go into more detail on the step-by-step process I use to solve the retirement planning puzzle in my book Retire Today, where I walk through coordinating your spending needs, Social Security, tax planning, investment and legacy decisions.

The second part of taking the right approach is to determine what you are solving. Most people create their spreadsheets in a way that solves for getting the most out of Social Security.

That's a worthy goal — you've paid into it your whole working career. But instead of solving for the highest dollar amount on your spreadsheet, I suggest you approach your decision based on the official name of the Social Security program.

Old-Age and Survivors Insurance

• Social Security is there to help you in your old age
• Social Security is there to help your survivor
• Social Security is there as insurance, in case the inflation, investment or longevity estimates you make in your retirement planning don't turn out the way you hoped

Learn the math. Do the math. Follow the math.

Only then will you feel certain your Social Security decision is the best for you.

Related Content

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• I'm a Financial Adviser: Here's How to Earn a Fistful of Interest on Your Cash in 2026 (Just Watch Out for the Taxes)
• I'm a Financial Planner for Millionaires: Here's How to Give Your Kids Cash Gifts Without Triggering IRS Paperwork
• 5 RMD Mistakes That Could Cost You Big-Time: Even Seasoned Retirees Slip Up

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

I was meeting with a client (let's call him Arthur) for a late lunch last week. We were tucked into a leather booth near the fireplace, the kind where the noise of the city just disappears.

Arthur is the picture of the self-made American success story: He has $2.2 million in a traditional IRA, a paid-off condo in the Gold Coast and a retirement spreadsheet so detailed it would make an aerospace engineer smile.

He leaned back, exhaled and said, "Ray, thank God for the One Big Beautiful Bill Act. I thought my tax rate was going to 25% this year, but we're safe. I'm staying in the 22% bracket forever."

I smiled and raised my glass slightly. "It is a huge win, Arthur. You're absolutely right that the headline rates are safe. But," I added gently, "there is a nuance in the new law that we need to watch out for. It preserved the tax brackets, but it didn't fix the interaction with Social Security."

He looked intrigued. "How so?"

"It's the provisional income formula," I explained. "It wasn't updated by the law. So while the published rate is 22%, the 'effective' rate for someone with your specific asset mix is actually much higher. When you withdraw that next dollar, the math works out to a 40.7% marginal tax rate."

Arthur paused. "40%? But the law says 22%."

"The law says 22%," I agreed. "But the math says 40%."

The false security of 2026

Here we are in 2026. The panic over the "tax sunset" has faded, replaced by a comfortable sense of security. But while the investing world was breathing a collective sigh of relief over the extension of the Tax Cuts and Jobs Act, they missed the critical flaw that Congress failed to address.

The danger in 2026 isn't that taxes are rising, it's that they are currently "on sale." Low taxes in your 60s are a lullaby, masking the reality that your required minimum distributions (RMDs) at 73 are a mathematical certainty waiting to collide with your Social Security check.

The new law locked in the low rates, but it left the 1983 tax thresholds untouched, leaving the guidance system armed and locked on to your retirement: The Social Security tax torpedo.

The 'success' penalty

The hard data has been screaming this for years: Retirees with $1 million to $3 million in tax-deferred accounts are statistically on track to pay the most disproportionately punitive and mathematically brutal lifetime tax bills of any demographic in America.

The ultra-wealthy don't fear this. If you have a massive pension or $10 million in the bank, the torpedo strikes, but it bounces right off your yacht's hull. These eight-figure millionaires are already paying the maximum tax on their benefits, and frankly, they were never counting on Social Security to fund their lifestyle in the first place.

The tax torpedo specifically targets the "disciplined savers." I'm talking about the engineers, teachers, midlevel managers and small-business owners who executed the wealth-building playbook to perfection.

They followed the gold standard of financial advice, maxing out their 401(k)s for 30 years. They built a seven-figure nest egg, but because it's all sitting in tax-deferred accounts, they are sitting ducks.

How the '22% bracket' soars to 40.7%

This is the math that keeps me up at night. The OBBBA extended the tax brackets, but it ignored the "provisional income" thresholds that trigger taxes on your Social Security.

These thresholds — $25,000 for singles and $32,000 for married couples — were set in 1983 and have never been indexed for inflation.

Because those thresholds are so low, your IRA withdrawals trigger a "double tax." Let's say you need an extra $1,000 for a trip to Europe. You pull that $1,000 from your traditional IRA:

• That $1,000 is taxable income.
• But because you just raised your provisional income, that withdrawal also drags an additional $850 of your Social Security benefit into the taxable bucket.
• In the eyes of the IRS, your income didn't go up by $1,000. It went up by $1,850.
• When you apply the 22% tax rate to that inflated number, you aren't paying $220. You are paying $407.

The math: $407 divided by your withdrawal of $1,000 equals a 40.7% marginal tax rate.

And that is just federal. If you live in a state like Minnesota, where the state government also taxes a portion of your benefits, that combined marginal hit can skyrocket to nearly 60%. You are effectively losing more than half of your next withdrawal to a tax system that is penalizing your success.

The deferral mistake

The danger in 2026 isn't that taxes are going up — it's that you think they are low, so you're getting complacent. Many retirees are looking at the new permanent brackets and thinking, "Great, I'll just leave my IRA alone until age 73."

Wrong. If you wait until RMDs kick in, the IRS seizes control of your withdrawal schedule.

But here is the kicker: Those retirement funds don't just sit there in your 60s. If your portfolio continues to grow at a healthy clip, that $2.2 million could easily be $3 million or more by the time the government forces your hand.

This growth amplifies the problem, turning a manageable withdrawal into a massive, mandatory taxable event — landing you squarely in that 40.7% Torpedo Zone every single year for the rest of your life.

The silver lining: The 'golden window'

Here is the good news. The OBBBA kept the tax rates low, which means the Roth conversion window is still open. You have a rare opportunity — what the research calls the golden window — between the day you retire and the day RMDs begin.

During this window, your wages have stopped, but your RMDs haven't started. You can choose to systematically move money from your torpedo-prone traditional IRA into your torpedo-proof Roth IRA.

• Pay the tax now at the known 22% rate, avoiding the 40.7% surtax later.
• Shrink your RMDs. A smaller traditional IRA means smaller forced withdrawals later.
• Roth is invisible. Roth withdrawals do not count toward the provisional income formula. They do not trigger the tax on your Social Security.

Defining your retirement destiny

Back to lunch. When Arthur signaled the server for the check, he moved like an engineer who had just figured out the exact trajectory to land a spaceship on Mars — precise, resolved and completely focused on the solution.

Our white tablecloth remained pristine, save for the ghost of a footprint from a chilled glass, but the atmosphere in our cognac-colored leather booth had shifted completely. Arthur didn't order dessert; he didn't need the sugar — he had the clarity of a new mission.

As he signed the check in the leather-bound folder, he looked at the fireplace and then back at me.

"I spent 40 years playing offense to build this," he said, tapping his fingers on that meticulous spreadsheet. "I'm not about to spend my retirement playing defense against a 'phantom' tax rate."

You shouldn't either.

The government kept the rates low, but they left the trap in the code, perhaps banking on the hope that you'll be too comfortable in your 60s to notice the 40% surtax waiting in your 70s.

Don't let a season of "on sale" taxes lull you into a strategic mistake. Follow the playbook of high achievers like Arthur: Take control of your tax destiny while the golden window is still open.

I'm a Registered Social Security Analyst ® (RSSA®), and I don't take the bet that the IRS will play fair. I run the math. The "tax sunset" didn't happen, but the sun is setting on your opportunity to fix this.

Use these next few years to defuse the torpedo or be prepared to pay a "success penalty" that turns your hard-earned retirement into a windfall for the government.

Related Content

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• Boomer Retirement Reality Check: The Numbers Look Bleak, But Here's What You Can Do About That

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Joanne De Simone has two grown sons with disabilities. Her older son, Benjamin, 27, is medically fragile and lives at home. Her younger son, Sebastian, 23, is on the autism spectrum and is in a non-degree inclusive college program out of state.

Because of her sons' needs, De Simone, 59, must carefully plan for her own retirement as well as for her children's futures.

"I've said to the support coordination agency we're working with that if my husband John, 61, and I drop dead tomorrow, you have to make sure Benjamin gets into [a good medical facility]," says De Simone, who lives in West Orange, N.J., and is the author of the book Fall and Recovery: Raising Children with Disabilities through Lessons Learned in Dance.

To ensure both of her sons are well cared for, De Simone and her husband must plan for long-term financial support and identify who will oversee their needs once she and her husband are no longer able to do so. "I need to do more research, so I can figure out what isn't covered and what Benjamin's financial needs will be, so I can divide the money accurately between the boys."

Nearly 1 million households in the United States have an adult with intellectual and developmental disabilities who is supported by an aging caregiver, according to Medicaid.gov.

"Financial planning [when you have a child with disabilities] is retire at roughly 60, hopefully live till 90 or beyond, pass away and then have another 30, 40 years or however long we need for our loved one with disabilities to have supports if they also have a long lifetime," says Nick Wallace, a financial adviser specializing in special needs planning with Northwestern Mutual.

He got into the business because he saw the need in his family's planning for his brother, Aaron, 33, who is disabled and needs full-time care as a result of a traumatic brain injury.

You don't have to have disabled children to need your money to last a very long time after your retirement. Healthier lifestyles and better medical care have made traditional financial planning irrelevant in the face of extreme longevity. The number of centenarians, people aged 100 or older, is expected to quadruple by the 2050s, reaching more than 400,000. That's up from only about 2,300 in 1950.

People with long life expectancies can learn from the families who have long had to save and plan to care for disabled children. Beyond special programs and plans designed for people with disabilities, these families have also figured out how to structure their basic finances so that their money lasts for decades.

Structure your accounts

Parents of disabled children often rely on government support, such as Medicaid and Social Security, to help cover basic cost-of-living expenses, such as food and housing. But having money to pay for just the basics often isn't enough.

To qualify for that government support, an individual with a disability typically must have less than $2,000 in their name.

Jason Miller, executive director of Plan NJ, a nonprofit that helps families plan for their disabled child's future, explains that a special needs trust allows individuals to continue receiving necessary life-saving benefits, while also supporting a robust quality of life.

"It ensures that funds remain available to provide a standard of living that includes not just essentials, but also personal enrichments like travel and recreation," says Miller.

Trusts, in general, can be put in place to protect loved ones, explains Casey Hayden, a wealth and investment adviser in Plymouth, Minn. This holds true regardless of whether you have a child with a disability. For example, parents and grandparents can use trusts during retirement to help minimize taxes, provide them with cash flow and organize monetary gifts, among other things.

"They also give the person who is setting up the trust the ability to pass [money] along from generation to generation without question," says Hayden.

While trusts are useful in certain situations, such as when you have a large estate, they can also complicate access and unnecessarily tie up assets, explains Hayden. "If most assets are in a retirement plan, bank account, and a residence, there are other [ways] to protect [those assets], outside of a trust. Simplicity and keeping everything in one spot make decisions and deviation, if needed, easy."

Ways to save

Funding a special needs trust can be difficult, but investing in other types of assets can help. For example, adviser Nick Wallace's mother, Carolyn, 69, who lives in Richmond, Ky., established a plan with a range of supports for her disabled son, Aaron.

"We set up a special needs trust, along with life insurance and investment strategies, that are designed to provide our son with the best care and the most supportive housing situation, as determined by his guardian and his medical team after we have passed or have become unable to skillfully manage his care," says Carolyn.

"We [want to make sure] his treatment plan will be on target for not only meeting his needs but also providing him the best opportunity for achieving/sustaining his peak wellness," she says.

Parents and grandparents can consider various types of life insurance, including term, permanent, and second-to-die policies. Each family needs to determine which tools work best for their own situation.

As people age, they sometimes shift their investments to accounts with lower risk. But it may make sense to invest some financial assets more aggressively, Nick Wallace explains. "We invest some of the money with the child's time horizon as opposed to all of it with the parent's time horizon."

And everyone who is near or in retirement, whether or not they have a child with a disability, needs to understand their cash flow needs. Hayden says to tailor your investment strategy to your cash flow needs rather than working around market trends.

One woman, who asked to be identified only by her initials, A.G., because she wants to keep her finances private, is the trustee for her older brother, who has a behavioral disability. "He has trouble keeping relationships, has trouble keeping jobs and is very prone to going into debt," says A.G.

A.G.'s father set aside money before he passed, so A.G.'s brother would have supplemental income. A.G. manages those assets. She set up a monthly amount to be distributed to her brother, similar to a salary. The remaining funds are invested, so the principal is protected.

"The whole thing is based on trust, trusting that your trustee will find the way to preserve the principal [and] still provide the maintenance. Of course, if [my brother] had… some catastrophe where he needed a larger sum, I could, of course, raid the corpus of the trust to pay for that," says A.G.

Parents and grandparents should review all available resources to understand their options and identify additional ways to save on current and future expenses. For example, Katie Kastberg, 56, of Lakeville, Minn., has two children, and she and her husband, Randy, are both retired. Their son, Keaton, 26, has autism, is non-verbal, lives with his parents and attends a day program three days a week.

When Keaton was born, Randy, 57, a disabled veteran who worked in finance, set aside money for college and their son's wedding. When Keaton received his diagnosis, they moved all of Keaton's savings to a special needs trust. Keaton and his parents have life insurance policies, which they've made smaller as they've aged because their other assets have grown.

Because of Randy's veteran status, his son receives a monthly stipend from the Veterans Administration, which is set aside and will eventually transfer to a special needs trust. Since Keaton is disabled, he will also be able to receive any remaining military retirement funds after both of his parents are gone. They also have benefits for Randy and Keaton's end-of-life costs.

Another option is to purchase long-term care insurance. "Chronic conditions can have a devastating impact on a family's financial well-being," says Frederick M. Misilo Jr., an attorney in Massachusetts. "Medical science is keeping us alive, but with [an] increased need for support in everyday activities of daily living."

"We want to make sure that the half a million or a million dollars we put aside, intending to give to our child to support them for the rest of their life, isn't eaten up by six years in a nursing home," says Earl Pedersen Jr., a special needs financial adviser in Branchburg, N.J. The youngest of Pedersen's four children is now 35 years old, has a developmental disability, and lives with his parents.

Finding the right manager

Aging parents of a child with disabilities often worry about who will manage their children's accounts when a parent is no longer around. "You work all your life to get these benefits arranged for your child, get them situated and then, if you don't have the point people involved in maintaining those benefits, you could very quickly lose those [them]," says Miller, the executive director of the nonprofit, Plan NJ, that helps families plan for their disabled children's futures.

De Simone listed her and her husband's siblings to take over the finances for their son. But their siblings are older than De Simone and her husband, so they need to find younger caregivers to help as well.

"You have to have backup to your backup," says De Simone. "I'm watching the next generation of the family to determine who we can add to the will so that if people are dying off, I don't have to worry about it."

Same-age siblings of a disabled child may be next in line to help out. But that can put unnecessary pressure on them. “A lot of times, parents don't want to burden their other child with the responsibility of taking care of their sibling and just want them to be a sibling," says Miller. "In that case, then you have to look outside of that family unit. And then there are professional organizations that can do this."

The more people supporting the individual, the better, says Misilo. A trust advisory committee, or a group of people familiar with the child with disabilities, can relieve a sibling of that burden and loop in a group of people familiar with the disabled child. This group should be established before the parents pass, to get to know one another, before they have to take action.

Including neutral parties in the process benefits all families, whether they have a disabled child or not. "When everything is centralized and a team is in place, loved ones aren't forced to dig through files, guess at intentions or coordinate strangers in the middle of a crisis," says Hayden. "They can do what matters most: show up, support one another and simply be family."

Location matters

Government assistance may be available for adults with disabilities, but the rules are complicated and can vary significantly depending on the state. That's something to consider before moving to another state.

If you're considering moving, it might not make sense, even if the cost of living in the new location is lower, explains Pedersen, the special-needs financial adviser in Branchburg, NJ. "You have to take into account the difference in benefits and services that are going to be available to your child outside of a state, [for example] like New Jersey, which has very good services," he says.

"There are states like California, New York, and a handful of others that have extremely robust government benefit systems, and then there are states like Florida [and] Texas… that do not," says Wallace. "And that can impact how much needs to be saved."

Pedersen recommends reviewing plans with a financial adviser at least once a year, if not more often, especially when there is a significant change in the family, such as the birth of a new baby, a death, a change in a beneficiary designation, or a change in tax law.

"Without constant monitoring and updating, your plan can really become obsolete," says Pedersen. "You can fall off the path you're on [that's] taking you from where you are today to where you want to go in 5, 10, 15, 25 years."

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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Most women don't make the wrong Social Security decision. They just make it in isolation.

That's what I see most often — thoughtful, well-intentioned decisions based on common advice, but without fully considering how that choice fits into the bigger picture.

Because Social Security isn't just a timing decision. It's part of a much broader plan — one that includes your investments, your taxes, your lifestyle and how you want to spend your time in retirement.

Why 'waiting' isn't always the best answer

You can claim Social Security as early as age 62. Wait until 70, and your benefit can be significantly higher.

For women who live well into their 80s or beyond — which many do — delaying can absolutely pay off.

But that outcome depends on more than just longevity.

The break-even age — when delaying overtakes the value of claiming earlier — typically falls in your early 80s. If you don't live past that point, you may never fully recover the income you gave up.

And even if you do, there's another question worth asking: When do you actually want to enjoy your money?

For many people, the early years of retirement — their 60s and early 70s — are the most active. This is when travel, hobbies and time with family often take priority.

Delaying Social Security may increase income later. But it can also mean relying more heavily on your own assets during the years when you're most likely to spend and enjoy them.

The part most people miss: What happens in your 60s

When you delay Social Security, you still need income.

For many retirees, that means withdrawing more from their investment portfolio in the early years of retirement.

And that introduces a risk many people don't fully consider.

If markets are strong, this strategy can work well. But if the market declines early — right as withdrawals are higher — it can place added strain on a portfolio.

Those early withdrawals reduce the assets that remain invested and the ability of your portfolio to recover when markets improve.

For women planning for longer retirements, that early pressure can have long-term implications.

On the other hand, claiming Social Security earlier may reduce the need to draw as heavily from investments, potentially preserving assets and providing more stability.

Neither approach is inherently better — but each leads to a very different outcome.

This is really about tradeoffs

At its core, the Social Security decision is a balancing act between:

• Higher guaranteed income later in life
• Preserving and protecting your investment portfolio
• Maintaining flexibility in your early retirement years

Delaying increases certainty later. Claiming earlier can create flexibility sooner.

The right choice depends on how those priorities align with your goals.

Your other assets matter more than you think

Social Security doesn't exist in a vacuum. Your decision should reflect the full picture of what you have:

• Pension income or other reliable sources
• Investment accounts and how they'll be used
• Legacy goals and how you want to pass on assets

In some cases, retirees use savings in their early 60s to "bridge the gap" and delay benefits.

In others, claiming earlier helps reduce withdrawals and preserve investments.

Both approaches can be appropriate depending on the situation.

Taxes can quietly reshape the outcome

Social Security also plays a role in your tax strategy.

Retirement income often comes from multiple sources, and the timing of each one matters.

Some considerations include:

• Delaying benefits may create an opportunity for Roth conversions in lower-income years
• Waiting too long can lead to higher income later, especially when Social Security and required minimum distributions (RMDs) overlap
• Higher income levels may increase Medicare premiums through IRMAA

In some cases, claiming earlier and spreading income over time can help manage these effects.

For married women, this decision goes beyond you

For married couples, Social Security decisions are interconnected.

When one spouse passes away, the surviving spouse keeps the higher of the two benefits.

Because women tend to live longer, the higher earner's decision can have a lasting impact on the surviving spouse's income.

That makes coordination between spouses especially important.

The emotional side of the decision

For many women, Social Security represents more than just income.

It represents certainty.

A guaranteed, inflation-adjusted income stream for life can provide a level of confidence that's difficult to replicate elsewhere.

And that sense of stability often plays an important role in how decisions are made.

Four questions to ask before you decide

Before choosing when to claim, consider:

• How does my personal life expectancy influence this decision?
• What impact will this have on my taxes over time?
• How will this choice affect my investment portfolio, especially early in retirement?
• How do I want to balance income later with flexibility and lifestyle earlier?

The bottom line

Social Security is one of the most important financial decisions in retirement.

But it's not a standalone decision.

When viewed in isolation, one strategy may seem clearly better. But when you consider your investments, taxes, lifestyle and long-term goals, the answer often becomes more nuanced.

That's why this decision is best made as part of a comprehensive plan — one that brings all the pieces together.

Because, ultimately, it's not just about maximizing a benefit.

It's about creating a retirement that supports how — and when — you want to live your life.

Related Content

• Strategies for Women to Maximize Social Security Benefits
• Social Security Warning: Five Missteps Too Many Women Make
• 3 Financial Hurdles Coming Up for Women: How to Overcome Them, From a Financial Planner
• Five Reasons You Should Take Social Security At 62 (and Five Reasons You Should Wait)
• These 10 Strategies Can Help Women Prepare for Their Impending Financial Power

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Most people leave thousands on the table by claiming Social Security too early. But what if you could change your mind? Whether you're looking for a total "do-over" or just a temporary "pause," this quick quiz reveals exactly what is — and isn't — possible.

From the 12-month withdrawal rule to the voluntary suspension at full retirement age (FRA), the rules for stopping and restarting benefits are notoriously tricky. Are you a Social Security strategist or just guessing? Test your knowledge with these 10 essential true-or-false questions.

And don't worry if you miss an answer; you can follow the links below the quiz to brush up on your knowledge.

Read More on Social Security

• What's My Social Security Full Retirement Age (FRA)?
• Delay Social Security Benefits — Even by a Month — to Boost Your Check
• When To Take Social Security Payments: Your Age Matters
• Reasons to Take Social Security Early
• Social Security Basics: Things You Must Know About Claiming and Maximizing Your Social Security Benefits

For many do‑it‑yourself (DIY) investors, Social Security is more than just a government benefit — it's a built‑in, inflation‑adjusted, lifetime income stream that plays a central role in retirement planning.

Deciding when and how to claim Social Security can have a larger financial impact than most investment decisions.

Below are seven strategies and frameworks DIY investors can use to help optimize their Social Security claiming decisions.

1. Understand the core claiming ages and trade‑offs

Your claiming age determines your monthly benefit. Age 62 is the earliest Social Security claiming age. If you choose to claim at this age, you will receive approximately 70-75% of your full retirement benefits, depending on your birth year.

It's important to note that claiming at this age means you will receive a lower monthly income, but for longer.

Ages 66 or 67, also depending on your birth year, are considered the full retirement age (FRA). If Social Security is claimed at this time, you will receive 100% of your full retirement benefit.

However, there is a third option. You can wait to claim your Social Security benefits until the maximum delay age of 70 years old. If you wait until age 70, you'll receive approximately 124-132% of your full benefit thanks to delayed retirement credits of 8% per year after FRA.

For DIY investors, the most important takeaway is that claiming early is a bet on having a short life expectancy. In contrast, delaying benefits is a bet on longevity and 8% per year growth (plus inflation adjustments) from the U.S. government.

It's important to note that this 8% annual increase in benefits is not market‑linked — it's a policy‑driven increase.

2. Evaluate 'break‑even' ages — but don't stop there

The traditional way to work out when to claim Social Security benefits is to calculate your "break‑even age."

This analysis compares the cumulative benefits received under different claiming ages and identifies the age at which delaying begins to produce higher total payouts than claiming earlier.

If you expect to live beyond your early 80s, delaying benefits typically helps produce more lifetime income.

However, DIY investors should look beyond this simple break‑even math:

Longevity risk matters more than average life expectancy. Living longer than expected can make delaying benefits more valuable.

Spousal considerations are critical. A surviving spouse often receives the higher benefit, so delaying can be a form of spousal protection.

Late‑life expenses tend to rise. Health care and caregiving costs increase over time, and a larger guaranteed income helps reduce portfolio withdrawals in those years.

To help account for these factors, DIY investors should run personalized scenarios that incorporate health, marital status and other income sources, and use Social Security calculators to help determine the most appropriate claiming age for their financial situation.

3. Coordinate claiming with portfolio withdrawal strategies

This is where DIY investors can help optimize their benefits. A common framework is to delay Social Security while drawing from your portfolio in early retirement. When used thoughtfully, this approach can help improve both income stability and risk management.

Delaying benefits can increase income later in life, creating a stronger income floor. Early withdrawals often occur when the portfolio is at its largest, which can help mitigate required minimum distributions (RMDs).

In addition, higher guaranteed income in later years can help lower stock market sequence-of-returns risk by reducing reliance on market performance during vulnerable phases of retirement.

This strategy is especially effective for DIY investors with sufficient savings, for example 25 times your annual expenses or more, or for those who want to reduce long-term market exposure.

4. Optimize for taxes: Social Security as a tax lever

DIY investors often underestimate the significant tax interplay of Social Security. It's vital to keep in mind that up to 85% of Social Security benefits can be taxed depending on "provisional income."

Claiming benefits and working in the years before your FRA can lead to benefit reductions owing to the earnings test, and claiming later gives you more years to help perform Roth conversions at quite possible low tax rates, particularly those years between retirement and RMD age.

5. Spousal claiming: Coordination creates leverage

For married couples, the primary goal often is to maximize household lifetime benefits.

To achieve this, you may consider having the higher-earning spouse delay retirement benefits until age 70 while having the lower-earning spouse claim their benefits earlier, around the ages of 62 to 65.

This allows the surviving spouse to receive higher benefits for life and locks in the maximum benefit for the high earner. Keep in mind that this strategy may be worth hundreds of thousands of dollars over a normal longevity range.

This coordination is essential because Social Security is effectively a survivor benefit plan, a longevity hedge and a lifetime inflation‑protected annuity.

6. Claiming early makes sense in specific situations

When it comes to Social Security, claiming early often only makes sense in specific financial situations.

If possible, you should look to avoid claiming early unless you have severe health issues that are expected to reduce longevity, you have no income sources, you're bridging a financial emergency, or you expect future benefits to be taxes at a high rate.

For most, claiming early permanently reduces financial flexibility.

7. Use software or calculators to validate decisions

DIY investors should not rely on rules of thumb. There are many tools that can help provide precision to help validate your decisions on when to claim your benefits.

Some of those tools include open-source calculators, Social Security Administration (SSA) benefit estimators, and retirement planning software such as portfolio withdrawal models and tax-planning tools.

The best approach is to model multiple claiming scenarios and analyze them alongside portfolio longevity, taxes and spousal benefits.

For DIY investors, Social Security is not a one-time decision, but a long-term planning lever that can affect income stability, taxes, portfolio risk and spousal security.

By modeling multiple scenarios and treating Social Security as a core component of retirement income planning rather than an afterthought, you can seek to improve outcomes over the course of retirement.

Related Content

• The Average Social Security Check by Age
• What's My Social Security Full Retirement Age?
• These Claiming Strategies Could Add Thousands to Your Social Security Checks
• A Financial Plan Is a Living Document: Is Yours Still Breathing?
• I'm a Financial Planner: Here Are Five Smart Moves for DIY Investors

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When most people think about Social Security, they picture a retired worker collecting a monthly check based on their own earnings record.

But today's families don't always fit that traditional mold and can vary in several ways from the traditional family structure of the past.

It is increasingly common for retirees to have younger spouses, minor children, adult children with disabilities or even grandchildren in their care.

These family dynamics introduce a broader set of Social Security benefits and a critical, but often misunderstood, rule that governs them all: The family maximum benefit (FMB).

Understanding who is eligible for family benefits, how much each person can receive and how the FMB limits total payouts is essential for families coordinating their claiming strategies and for advisers guiding them through complex decisions.

What is the family maximum benefit?

The FMB is the cap on the total amount of benefits that can be paid to a family based on one worker's earnings record.

While the worker always receives their full retirement benefit amount depending on the age they claim, the benefits paid to dependents, such as spouses and children, are collectively limited. Once the FMB is reached, dependent benefits are reduced proportionally.

For retirement-based benefits, the FMB is typically between 150% and 188% of the worker's primary insurance amount (PIA), which is the benefit payable to the worker at full retirement age (FRA).

Importantly, delayed retirement credits do not increase the FMB. Even if the worker delays benefits until age 70, the FMB is still calculated using the worker's PIA, not the higher delayed benefit amount. And likewise, if the worker claims early and is receiving a reduced benefit amount, the PIA is still used in calculating the FMB.

How families trigger family benefits

Today's retiree families can vary widely from the traditional structure of decades past. The following are common examples:

• An older husband with a younger wife and one or more children under age 18
• A retired worker caring for a disabled adult child whose disability began before age 22
• A grandparent who has legal custody of a grandchild
• A younger spouse who is not yet retirement age but is caring for a minor or disabled child

When a worker begins collecting Social Security retirement benefits, several family members may become eligible for benefits on that worker's earnings record, including:

• Minor children (generally under age 18, or 19 if still in high school)
• Disabled adult children (DACs) whose disability began before age 22
• A young spouse caring for a child under age 16 or a disabled child, regardless of the spouse's age

These benefits can create a significant income stream for families, but they are not unlimited.

What benefits count toward the family maximum?

The following benefits are subject to the family maximum limit:

• A spousal benefit, age 62 or older
• Child benefits
• Child-in-care spousal benefits
• Disabled adult child benefits

The worker's own retirement benefit is not reduced by the family maximum. Instead, when total dependent benefits exceed the limit, reductions are applied to the dependents, not the worker.

For retirement and survivor benefits, the FMB is generally between 150% and 188% of the worker's PIA, calculated using a statutory formula. If the combined auxiliary benefits exceed that limit, each dependent's benefit is proportionally reduced.

If multiple dependents are eligible, the reductions are shared proportionally across them.

A case study: Coordinating benefits for a family

Consider the following scenario:

John is 67 and has just reached his FRA. His PIA is $2,400 per month. He is married to Lisa, age 45, and they have two children, ages 12 and 15. Lisa does not work outside the home and cares for the children.

When John claims his retirement benefit:

• Each child is eligible for up to 50% of John's PIA, or $1,200 per month
• Lisa is eligible for a child-in-care spousal benefit of up to $1,200 per month until her youngest child turns 16

In theory, this family could receive:

• John: $2,400
• Lisa: $1,200
• Child 1: $1,200
• Child 2: $1,200

That totals $6,000 per month, 250% of John's PIA.

However, John's FMB is approximately 175% of his PIA, or $4,200 per month. (The SSA explains how the FMB is calculated on its website.)

First, regardless of when he claims, John's PIA of $2,400 is subtracted from the FMB of $4,200. Therefore only $1,800 remains available for all dependent benefits combined.

Instead of each dependent receiving $1,200, the $1,800 is divided proportionally among Lisa and the two children. Each dependent receives $600 per month, not $1,200.

This illustrates a critical point: Eligibility does not guarantee the full benefit amount when multiple dependents are involved.

Planning considerations and hidden complexities

Several factors can dramatically affect how family benefits play out in real life.

Timing matters. If the worker delays retirement benefits, dependent benefits generally cannot be paid until the worker files. Families relying on child or child-in-care benefits may benefit from earlier claiming, even if delayed retirement credits would increase the worker's own benefit later.

Changes over time. As children age out of eligibility, the remaining dependents may see their benefits increase because fewer people are sharing the family maximum.

Similarly, when a child-in-care spouse loses eligibility because the youngest child turns 16, benefits are reallocated.

Adult children with disabilities. When an adult child with disabilities is involved, benefits may continue for decades. Coordinating these benefits with survivor benefits and Medicare eligibility adds another layer of complexity.

Survivor planning. After the worker's death, the family maximum rules change. Survivor benefits follow a different maximum formula, often allowing higher total benefits than during the worker's lifetime.

Why the FMB requires careful coordination

The Social Security FMB was designed to balance support for families with the financial limits of the system. However, it introduces complexity that cannot be addressed with simple claiming rules or age-based strategies.

Families with younger spouses, children, or disabled dependents must consider not only who is eligible, but how benefits interact, how long eligibility lasts and how claiming decisions affect the entire household over time.

For these families, Social Security is not just a retirement benefit, it is a family income planning tool. Understanding the FMB is the key to using it wisely.

Key takeaways for advisers

• The FMB is not optional and not negotiable
• It applies only to auxiliary benefits, not the worker's own check
• Reductions are shared proportionally
• Complex families, especially those with DACs, require long-term modeling, not one-time estimates

Understanding how the FMB works and how it shifts over time can help families protect income, avoid surprises and make more confident claiming choices.

Related Content

• Six Changes to Social Security in 2026
• The Average Monthly Social Security Check: December 2025
• Social Security Break-Even Math Is Helpful, But Don't Let It Dictate When You'll File
• Still Working While Receiving Social Security? A Financial Adviser's Guide to the Earnings Test
• Filed for Social Security Too Soon? 2 Ways to Get a Do-Over

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Most of us assume our retirement savings are untouchable, but the law isn't always that simple. Depending on the type of IRA you own and/or how you inherited it, your "safe" money might actually be on the table for creditors. Take this 10-question quiz to see if your hard-earned savings are truly protected — or if you're sitting on a hidden risk.

Don't worry if you miss an answer; you can follow the links below the quiz to brush up on your knowledge.

More on IRAs, from the Kiplinger team:

• Is Your IRA Protected from Creditors in Bankruptcy?
• 6 Changes to IRAs, 401(k)s and HSAs in 2026
• The Average Retirement Savings by Age
• Roth IRAs: What They Are and How They Work
• IRA Conversion to Roth: Rules to Convert an IRA or 401(k) to a Roth IRA
• Roth IRA Contribution Limits for 2026
• SEP IRA Contribution Limits for 2026

Getting the maximum possible Social Security check isn't just about having a high salary; it’s about mastering the timing and the specific rules of the Social Security Administration. With the maximum monthly benefit hitting $5,181 in 2026 for those claiming at age 70, the stakes for your retirement strategy have never been higher.

Whether you're navigating the earnings test while working or considering a strategic "pause" to earn an annual boost, understanding these concepts is the key to a secure financial future. Take this quiz to see if you have the expertise to claim your full share of the system.

And don't worry if you miss an answer; you can follow the links below the quiz to brush up on your knowledge.

More on Social Security, from the Kiplinger retirement team:

• Delay Social Security Benefits — Even by a Month — to Boost Your Check
• What's My Social Security Full Retirement Age (FRA)?
• When To Take Social Security Payments: Your Age Matters
• Two Ways To Stop and Restart Social Security: Ditch the Regret
• The Social Security Earnings Test: Know This Rule Before Working in Retirement
• Can Both Spouses Collect Social Security Benefits?
• How Divorced Retirees Can Maximize Their Social Security Benefits: A Case Study
• 13 Answers to Pressing Social Security Questions
• Social Security Basics: Things You Must Know About Claiming and Maximizing Your Social Security Benefits
• Reasons to Take Social Security Early
• The 10 Most Costly Social Security Mistakes to Avoid

As a retiree, any extra income probably feels welcome. But unfortunately for some, a seemingly minor increase in reported income can ripple through your finances, affecting not just your tax return but also your Medicare premiums.

If you're on Medicare, the Income Related Monthly Adjustment Amount (IRMAA) means that crossing an income threshold by even one dollar can trigger higher Medicare Part B and Part D premiums.

Understanding how IRMAA works is essential — especially when a single dollar can make a difference. Here's more of what you need to know about structuring retirement income to avoid unnecessary costs and taxes.

The IRMAA impact on Medicare premiums

IRMAA increases Medicare Part B and Part D premiums once your modified adjusted gross income (MAGI) exceeds specific thresholds. For IRMAA purposes, MAGI generally includes adjusted gross income (AGI) plus tax-exempt interest.

The key detail is how the thresholds operate. They are fixed tiers. If income exceeds a threshold by even one dollar, the higher premium applies.

Consider a married couple whose income exceeds an IRMAA threshold by one dollar. Crossing that line moves them into the next premium tier. That single dollar can increase Medicare Part B and D premiums by roughly $ 1,000 per person annually, even though ordinary income tax rates apply only to the additional dollar itself.

For the 2025 tax year (returns you're filing now this 2026 tax season), retirees who cross the first IRMAA threshold pay an additional $74 per month for Medicare Part B and $13.70 per month for Part D coverage, according to the Centers for Medicare & Medicaid Services (CMS).

That totals approximately $1,052 per person annually, or roughly $2,105 for married couples.

Note: These surcharges apply in addition to ordinary income tax on the same income. IRMAA income thresholds are adjusted annually for inflation, and CMS publishes updated brackets each year.

The two-year IRMMA lookback rule

Here’s the catch: IRMAA doesn’t look at what you’re earning now. The amount is based on your income from two years earlier. That means the income reported on your 2024 tax return determines what you’ll pay for Medicare premiums in 2026.

The rule is spelled out in the Social Security Administration’s IRMAA guidance, but it’s easy to overlook how small income changes from one year to the next can affect future premiums.

For example, because of the lookback delay, a Roth conversion, capital gain, or larger withdrawal might not affect premiums until two years later. By the time the increase appears, the income decision that caused it might feel disconnected from the result.

IRMAA determinations are reassessed each year using the most recent tax return available, which makes income forecasting a critical part of retirement planning.

The compounding tax impact of higher retirement income

As retirement income fluctuates, several tax calculations can shift in tandem.

• Ordinary income tax might increase. As retirement income changes, retirees might find themselves in a higher federal income tax bracket, which could result in a greater percentage of their income being subject to ordinary income tax.
• A larger portion of Social Security benefits might become taxable. With rising income levels, a larger portion of Social Security benefits can become taxable. As Kiplinger has reported, the IRS uses a "combined income formula," which can lead to up to 85% of Social Security benefits being subject to federal income tax if total income exceeds certain thresholds.
• Required minimum distributions. RMDs are required beginning at age 73 under the SECURE 2.0 Act. These distributions are fully taxable and impact adjusted gross income.

Even a modest income increase can trigger concurrent increases in taxes on Social Security benefits and Medicare premiums.

Crossing IRMAA threshold one dollar: Practical examples

Consider a retiree whose income, based on 2025 IRMAA thresholds, ends up just one dollar above the first income threshold with a MAGI of $106,001. At a 22% federal tax rate, that single dollar starts a chain reaction:

• Medicare Part B premiums increase from $185 per month to $259 per month, an additional $74 per month, or $888 per year.
• Medicare Part D IRMAA surcharges increase by $13.70 per month, totaling $164.40 per year.
• The dollar itself is taxed at 22%, adding 22 cents in federal income tax.
• Taxes on Social Security benefits may increase depending on the retiree’s provisional income calculation.

The total damage? Approximately $1,052.40 for the year, all because of one extra dollar of income.

Now consider a retiree whose income, based on 2026 IRMAA brackets, ends up just one dollar above the first income threshold with a MAGI of $109,001. At a 22% federal tax rate, that single dollar starts a chain reaction:

• Medicare Part B premiums increase from $202.90 per month to $284.10 per month, an additional $81.20 per month, or $974.40 per year.
• Medicare Part D IRMAA surcharges increase by $14.50 per month, totaling $174 per year.
• The dollar itself is taxed at 22%, adding 22 cents in federal income tax.
• The amount of Social Security benefits subject to tax might increase, depending on provisional income positioning.

The total damage? Approximately $1,148.40 for the year, all because of one extra dollar of income.

In each scenario, you can see how the retiree pays more in taxes and Medicare premiums than the extra income generated. That's the effect of a hard income threshold.

Note: IRMAA isn't a tax, but it can function like a stealth one. When income increases, both federal taxes and Medicare premiums, the true marginal cost of that extra dollar can be higher than expected.

Managing taxable Income to avoid higher Medicare premiums

Retirees are often vulnerable to surcharges because the IRMAA trigger is highly sensitive to small income changes. However, the objective isn't to eliminate income but rather to manage its timing.

Because IRMAA responds to shifts rather than just steady increases, maintaining a modest buffer below thresholds can reduce the risk of unexpectedly crossing into a higher tier.

Required minimum distributions (RMDs): Once you turn 73, retirement account withdrawals count toward your MAGI, which can push you above the IRMAA threshold. Projecting these distributions early can help you anticipate how future income will shape your taxes and IRMAA exposure.

The occasional Roth conversion: Converting from a traditional IRA to a Roth IRA can lead to a MAGI spike for that year. However, if completed before Medicare enrollment, these conversions can help reduce future exposure to higher premium tiers. Spreading or "staggering" conversions across multiple years can further reduce sharp increases in adjusted gross income.

Dividends and capital gains: Even if you don’t sell, fund payouts quietly increase income. Similarly, large one-time events, such as the sale of a business or investment property, can affect premiums. Staggering capital gains rather than realizing them in a single year can help control these income spikes.

Medicare IRMAA: Bottom line

When income crosses an IRMAA threshold by even one dollar, Medicare premiums can increase.

But as you might already have experienced, retirement income doesn't operate in a vacuum. It flows through the tax code and into Medicare premiums. Comprehensive planning can help you navigate those interactions thoughtfully and keep more of your earnings.

Review your specific financial circumstances with a qualified tax professional. They can help clarify potential tax exposure beforehand rather than after the fact.

Read More

• How the IRS Taxes Retirement Income
• 3 Retirement Changes to Watch in 2026: Tax Edition
• How the New $6K Senior Tax Deduction Impacts IRMAA Costs

Understanding the Medigap trap is crucial for long-term healthcare planning. In the Medicare Advantage model, you save money when you are healthy, but face a "trap" if you become ill and want to switch to the more predictable original Medicare/Medigap model, only to find you no longer qualify for Medigap coverage due to your health.

For a healthy 65-year-old, Medicare Advantage looks like a win. You save $2,000+ per year in Part D and Medigap premiums and get "free" dental and vision care. However, if you develop a chronic condition, such as cancer or heart disease, at age 72, you may suddenly be drowning in costly copays that add up.

When you try to switch to Medigap to stop those bills, the insurance company "underwrites" you. Because of your diagnosis, they can legally deny your application, leaving you stuck in the higher-cost plan.

You'll want to know those rules as you navigate Medicare. Don't worry if you miss an answer; you can follow the links below the quiz to brush up on your knowledge.

More on Medicare, from the Kiplinger retirement team:

• Watch Out for the ‘Medigap Trap’
• What’s the Best Medigap Plan?
• The Rules for Making a Medigap Switch
• How Medigap Insurance Is Affected by Preexisting Conditions
• 12 FAQs About Medicare: Your Medicare Questions Answered
• 11 Costly Medicare Mistakes You Should Avoid Making
• Can You Sign Up for Medicare While Still on an Employer Health Plan?
• Medicare Open Enrollment Occurs Annually from October to December — Here's What You Need to Know
• Medicare Advantage Open Enrollment Runs from January 1 to March 31

Most people approach Social Security like they're buying a warranty. They find the break-even age on a chart, circle it and call it a decision.

If delaying "wins" after 81, they wait. If the break-even is 79, they file now.

That logic seems straightforward, but in reality, retirement planning is rarely this simple.

Claiming Social Security is really a trade-off between income today and higher guaranteed income later, and the ripple effects of that choice show up in taxes, portfolio withdrawals, Medicare premiums and what happens to a surviving spouse.

Break-even math can be a helpful starting point, but it's a poor finishing point.

Here are common break-even ranges people see:

These ranges are a useful gut check. They tell you roughly how long you'd need to live for delaying to "pay off." But they ignore the costs you absorb while you wait, how markets behave, how taxes stack up and how your decision affects your spouse.

In other words, they assume everything else stays the same — but in retirement, almost nothing does.

The hidden cost of waiting: You must fund the gap

When you delay Social Security, you're not just choosing patience, you're choosing a different funding plan for your early retirement years.

Delaying from full retirement age to 70 means roughly three years without checks. Delaying from 62 to 70 can mean as many as eight years. During that time, your lifestyle still must be paid for.

For most households, that gap is filled with money from an IRA or 401(k), a taxable brokerage account or cash savings. If most of your assets are pre-tax, the gap can be more expensive than people expect because withdrawals are taxed.

Needing $10,000 a month to live might require pulling far more than $10,000 from a 401(k) to net that amount after withholding.

This is where many savers get surprised. They focus on the larger age-70 benefit but don't fully account for what it takes to reach 70 without forcing large, taxable withdrawals or selling investments during a down market.

The decision isn't just "bigger check later vs smaller check now." It's also "how will I pay my bills in the meantime, and at what cost?"

Claiming age is a risk trade-off, not a math contest

A clearer way to think about Social Security timing is as a choice about how much of your retirement income will be guaranteed and how much will depend on markets and withdrawals.

Claiming earlier generally does two things:

• It starts stable income sooner
• It reduces how much you need to pull from your portfolio in your 60s

Delaying does two different things:

• It locks in a higher monthly benefit that rises with inflation
• It raises the long-term "floor" of income you can't outlive

Neither approach is automatically better. Early claiming prioritizes cash flow and simplicity in your 60s. Delaying prioritizes security in your 70s, 80s and beyond.

The right choice depends on which risks you care most about and what you want retirement to feel like over time.

Longevity risk: Why bigger checks later can act like insurance

Longevity risk is straightforward: You might live longer than your portfolio plan expects. Social Security is one of the few income sources designed to last for life, with annual cost-of-living adjustments.

That makes delaying, especially to 70, function a bit like longevity insurance. You give up smaller checks now in exchange for a larger, guaranteed check later that keeps arriving no matter how long you live.

This matters more if longevity runs in your family, if you expect to be the spouse who lives longer, or if you want more "sleep-well" income in your later years when managing investments may feel harder.

For many people with substantial savings, the fear isn't "Can I pay the bills this month?" It's "Will I still feel secure paying the bills at 87 without worrying about markets?" A higher guaranteed benefit can ease that future pressure.

Sequence of returns risk: Why the early years matter most

Sequence of returns risk means that bad markets early in retirement can do far more damage than bad markets later, especially if you're selling investments to fund spending.

This connects directly to Social Security timing. If you delay benefits, you may need larger portfolio withdrawals in your 60s.

In a down market, that can be painful because you're selling more shares at lower prices, which reduces your ability to benefit from a recovery.

If you claim earlier, Social Security can act like a buffer, reducing how much you need to sell when markets are weak.

For a household living mostly off investments from 60 to 70, waiting for a bigger check can work beautifully in smooth markets. If markets are weak in your first few retirement years, it can force withdrawals at the worst possible time.

That doesn't mean you should always claim early, but rather your plan should be stress-tested against an ugly market, not just average returns.

Spousal and survivor benefits: The household perspective

For married couples, the higher earner's claiming decision often matters more than any individual break-even age. That's because when one spouse dies, the survivor generally keeps only the higher of the two Social Security benefits.

Consider a simple example. John is the higher earner, and Mary's benefit is smaller. If John claims early and locks in a reduced benefit, Mary may be left with a permanently lower survivor benefit for the rest of her life.

If John delays and secures a larger check, that higher amount could support Mary for many years if she outlives him.

This is why Social Security isn't really two separate decisions for couples. It's a household decision with a built-in "what if one of us lives a long time alone?" stress test.

Taxes and Medicare: How claiming age reshapes your whole picture

For households with seven-figure savings, Social Security timing is tightly linked to taxes and Medicare premiums.

One key factor is the Roth conversion window before required minimum distributions (RMDs) begin at age 73 or 75, depending on when you were born. If most of your money sits in pre-tax accounts, your 60s may be a valuable period to convert some dollars to Roth at known tax rates.

Delaying Social Security can increase the withdrawals you need in those years, potentially pushing you into higher tax brackets and complicating your conversion strategy.

Social Security itself can also become taxable as your other income rises, so the timing of when benefits start affects how everything stacks together on your return.

Then there's Medicare. Premiums are based on your modified adjusted gross income from two years earlier. A big income spike at 63 — perhaps from IRA withdrawals or Roth conversions — can raise your Medicare premiums at 65. That two-year lookback makes planning especially important.

Some retirees even claim Social Security earlier not because they need the money to live, but because they want steady cash flow to help pay taxes on Roth conversions. In that setup, the benefit supports the tax plan, and the portfolio plan becomes simpler.

How to decide: A simple framework

A strong Social Security strategy starts with your withdrawal and tax plan, then works backward to claiming age. If you reverse that order, you can end up forcing withdrawals that create avoidable tax and market risk.

Begin by mapping your income from roughly 60 to 70 by evaluating:

• Your spending target, and how it might change after the "go-go" years
• Any pension income you'll receive
• Which accounts you'll tap first across taxable, pre-tax, or Roth accounts
• How long your portfolio must cover the gap if you delay benefits

Then run one "ugly year" test. Imagine markets are down, a major home repair hits, or medical costs spike. If delaying to 70 would force you to sell a lot of investments in that scenario, that's important information, even if the break-even math still looks favorable.

As a rough guide:

Claim at 62. Often makes sense if you're retiring early, markets look shaky, you want to reduce early portfolio withdrawals, or you're using your 60s as a tax-planning window for Roth conversions.

Claim at full retirement age (67). Can be a good middle path if you're still working near retirement, want fewer moving parts, or don't feel strongly about pushing all the way to 70.

Delay to 70. Tends to fit if you expect a long life, you're the higher earner protecting a spouse, you want the highest guaranteed income later, and your portfolio can comfortably fund the gap without forcing bad sales or big tax spikes.

None of these rules is automatic. They're starting points that should align with your broader withdrawal and tax strategy.

The bottom line

There isn't a single "correct" age to claim Social Security, there's only the right age for your plan. Break-even charts can tell you how long you'd need to live to come out ahead, but they can't tell you how you'll feel getting there, what you'll pay in taxes or how secure your spouse will be if you're gone.

Before you circle a number on a chart, step back and picture your retirement as a whole: Where your income will come from, how you'll handle bad markets and what your later years might look like.

When your claiming decision supports that bigger picture, you're far more likely to feel confident in it today and decades from now.

Related Content

• Eight Strategies for Deciding When to File for Social Security
• I'm an Annuities Pro: This Is How You Can Cover the Income Gap While Your Social Security Benefits Grow
• The 'Sequence of Returns' Risk Could Shrink Your Retirement Nest Egg
• I'm an Investment Adviser: This Is the Tax Diversification Strategy You Need for Your Retirement Income
• 4 Steps for Managing Income Withdrawals in Retirement

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Your Social Security Number (SSN) was never designed to be the "master key" for your entire financial life, yet in 2026, that is exactly what it has become. In an era where data breaches are practically a weekly occurrence and AI-powered scammers can generate convincing fake identities in seconds, simply "guarding" your nine-digit number is no longer enough.

To truly protect your future, you need to transition from a passive defense to an active one. Locking your SSN is a strategic move that shuts down the two most common avenues for fraud: illegal employment and unauthorized access to your government records. By understanding the tools available — from the E-Verify "Self Lock" to the SSA’s "Electronic Access Block" — you can effectively take your identity off the market.

How to lock your Social Security number

Locking your Social Security Number (SSN) isn't a single "on/off" switch. Instead, it involves two primary government features designed to stop different types of identity theft: account takeover and employment fraud.

While you cannot "freeze" an SSN exactly like a credit report, you can achieve a similar result using two distinct government "locks." Here is the breakdown of how they work and how they differ.

The E-Verify "Self Lock" (employment protection)

This lock specifically prevents scammers from using your SSN to get a job or pass an employment background check at any of the millions of employers that use the federal E-Verify system.

Why this is important: If someone uses your SSN for work, the employer may report that person’s income to the IRS using your SSN. When you file your tax return, you wouldn’t have included those earnings because they weren’t yours. But the IRS doesn’t know that. Their records will show you failed to report all of your income.

• How it works: You create a myE-Verify account. Once locked, any employer who runs your SSN through the E-Verify system will receive a "mismatch," effectively stopping the hiring process.
  • How to use Self Lock- The Self Lock feature is only available to myE-Verify account holders. To lock your SSN, you must select and answer three challenge questions. Select questions you can easily answer, because you will need to answer them again to verify your identity if you receive an E-Verify Tentative Non-confirmation (mismatch) due to Self Lock.
• Duration: The lock lasts for one year. You will receive a notification 30 days before it expires to renew it.
• The 2026 twist: With the rise of AI-generated identities, this lock is one of the few ways to ensure your "work history" isn't being used by someone else.

Reminder: If you are about to start a new job with an E-Verify employer, you should log into your account and unlock your SSN.

SSA "Block Electronic Access" (stops account takeover)

When you block electronic access to your account, this blocks everyone — including you — from accessing or changing your Social Security records online or via the SSA's automated phone system.

When you do this, no one, including you, will be able to see or change your personal information. If you have requested that the SSA block access to your record and later change your mind or simply need access, you can contact the SSA and ask to have the block removed. You will need to prove your identity when you contact the SSA.

• How it works: You must call the Social Security Administration at 1-800-772-1213 or visit a local SSA office to request an "Electronic Access Block." It blocks all automated telephone and internet access to your record.
• The catch: The block includes you. If you need to check your benefits or change your address, you will have to visit a Social Security office in person or speak to a live agent and provide proof of identity.
• Why use it: Use this if you want to prevent a hacker from "claiming" your account via Login.gov or ID.me, and/or if you know your SSN has been leaked in a major breach.

SSN lock vs credit freeze

Locking your Social Security Number (SSN) has become a more common and necessary tactic as AI-driven fraud, such as voice cloning and deepfakes, has made standard identity verification less reliable. Hackers and cybercriminals are relentless. According to a study by the University of Maryland, a cyber attack occurs every 39 seconds, translating into an average of 2,244 attacks per day.

Being able to limit access to your information and limit the use of your SSN is a valuable tool to have if you think your number has been compromised or if your identity has been stolen.

So, while you can’t put a freeze on your SSN the same way you can freeze your credit, you can make it more secure and harder to exploit.

SSN security checklist

Here is a step-by-step checklist to secure your Social Security Number. Since 2026 brings new digital requirements, such as mandatory Login.gov or ID.me accounts for access to your Medicare account, following these steps in order is the most efficient way to build your "identity fortress."

• The "Digital deadbolt" 
  • Create your mySocialSecurity account: Before locking anything, ensure you have an active account at SSA.gov. You must use Login.gov or ID.me to sign in. Creating this now prevents a scammer from "claiming" your digital identity first.
  • Activate the SSA "Electronic Access Block": Call the Social Security Administration or visit your local office. Request to block all automated telephone and electronic access to your record.
  • Engage the E-Verify "Self Lock": Visit myE-Verify and create an account. Use the "Self Lock" feature to prevent your SSN from being used for employment eligibility checks.
•  The "Financial firewall" 
  • Freeze your credit: Contact the three major credit bureaus individually (Equifax, Experian and TransUnion). A credit freeze is the most effective way to stop unauthorized loans or credit cards from being opened in your name.
  • Request an IRS Identity Protection PIN (IP PIN): Visit the IRS IP PIN portal. This 6-digit code acts as a second password for your tax return, making it nearly impossible for a scammer to file a fraudulent return for your refund.
• Ongoing maintenance
  •  Store your security keys: Keep the answers to your E-Verify security questions and your IRS IP PIN in a secure password manager.
  • Mark your calendar for renewals: Set a reminder for 11 months from today to renew your E-Verify Self Lock.
  • Pre-Unlock for major life events: If you are applying for a new job or a mortgage, remember to "thaw" your credit and "unlock" your E-Verify status 48–72 hours in advance to avoid delays.

Locking your SS number is worth the time

Securing your Social Security Number isn't a "set it and forget it" task; it's an ongoing commitment to your digital well-being. While the process of activating these blocks might take an afternoon of phone calls and web forms, the peace of mind it buys is invaluable.

By putting these barriers in place, you aren't just protecting a number; you’re protecting your tax refunds, your future retirement benefits, and your credit reputation from being hijacked. In a world where identity is the new currency, a locked SSN ensures that you are the only one authorized to spend it. Don't wait for a notification of a "suspicious login" or an IRS audit to take action — build your "identity fortress" today while the keys are still firmly in your hands.

Related Content

• The Average Monthly Social Security Check
• How to Freeze Your Credit in Three Steps
• How to Protect Your Identity, Finances If You Lose Your Phone
• How to Protect Your Home From Deed Fraud

Taxes on Social Security benefits have been controversial for decades. Many retirees understandably argue that they already paid into the system and so should not face taxes on their Social Security checks at all.

That argument is now back in the spotlight, raising new questions about fairness — especially when those taxes kick in under technical rules.

The issue traces back to the Social Security Fairness Act (SSFA), signed into law by former President Joe Biden early last year. As Kiplinger reported, the law repealed provisions that had reduced or wiped out benefits for millions of public-sector workers whose careers included jobs not covered by Social Security taxes.

The wrinkle? While the repeal led to long-awaited lump-sum payments for many retirees, it also brought an unintended twist: higher-than-expected tax bills for the very people the SSFA was meant to help.

A potential solution? Enter the No Tax on Restored Benefits Act. The bipartisan proposal wouldn’t end taxes on Social Security benefits altogether. But supporters say it would finally fix the unintended tax hit for retirees who are only now receiving benefits they earned years ago.

Here's more of what you need to know.

How the Social Security Fairness Act created a retiree tax surprise

Enacted on January 5, 2025, the Social Security Fairness Act repealed two provisions that had long reduced or eliminated Social Security benefits for public-sector workers. whose jobs weren’t covered by Social Security taxes. Those are the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

Because the repeal was made retroactive to Jan. 1, 2024, the Social Security Administration (SSA) recalculated benefits and began issuing one-time lump-sum retroactive payments in 2025. The SSA sent payments to people whose checks had been reduced in years past.

In many cases, that resulted in large lump-sum payments issued in 2025, representing benefits that should have been paid gradually over many prior years.

Here’s where the tax problem comes in. Under current IRS rules, Social Security benefits, including retroactive payments, are taxable in the year they are received.

• That means a retiree who got a large catch-up payment in 2025 must include it as income on their 2025 federal tax return (filing now in tax season 2026), even though the money reflects benefits earned over a much longer period.
• For some retirees, that one-time spike can push them into a higher federal income tax bracket, increase the share of Social Security subject to tax, or trigger higher Medicare premiums down the line — perhaps without any real change in their underlying financial situation.

What the No Tax on Restored Benefits Act would (and wouldn’t) do

To address that issue, Rep. Lance Gooden (R-Texas) introduced the No Tax on Restored Benefits Act in early February. The bill would amend the tax code to exclude retroactive Social Security payments tied specifically to the repeal of WEP and GPO from federal taxable income.

In a release announcing the legislation, Gooden framed the change as a correction, not a giveaway, saying:

“Our public-sector retirees worked their whole lives to serve and improve our communities. The No Tax on Restored Benefits Act guarantees that they keep every dollar of the benefits they have rightfully earned.”

Democratic lawmakers backing the bill agree that the tax outcome was never intended when Congress moved to restore benefits.

Rep. Chellie Pingree (D-Maine), a cosponsor, said in a statement that the Social Security Fairness Act was meant to correct benefit inequities, not create new financial stress for retirees.

“The Social Security Fairness Act was never intended to saddle widows, low-income seniors, and dedicated public servants with an unexpected tax bill,” Pingree said, adding that the new proposal “fairly addresses the problem that arose.”

Some advocacy groups, including the Texas Retired Teachers Association, the International Association of Chiefs of Police, the National Association of Police Organizations, and the National Fraternal Order of Police, have reportedly echoed that concern.

A major timing issue is that some retirees are discovering the tax impact only when they sit down to file this tax season. That, as some policymakers note, is long after the lump-sum payment has likely already been spent on routine living costs.

But it's important to appreciate that the proposal is intentionally narrow. For example, it doesn't change how Social Security benefits are taxed overall, change benefit formulas, or affect Social Security trust fund operations.

Instead, the bill focuses on the timing mismatch created when years of underpaid benefits arrive all at once.

So, essentially, if passed, the legislation would:

• Exclude from taxable income retroactive WEP- and GPO-related payments some retirees received in 2025
• Apply to the 2025 tax year (returns being filed now during the 2026 tax season)
• Not change the current Social Security tax rules for ongoing monthly benefits

That distinction matters because proposals to eliminate taxes on Social Security have been circulating for years. (Despite some assertions to the contrary regarding the 2025 Trump/GOP tax and spending bill, the elimination of taxes on Social Security entirely is a separate and larger policy debate that remains politically contentious and unresolved.)

Who would be impacted?

The legislation would primarily affect retirees who received retroactive Social Security payments in 2025 because their benefits were recalculated after the repeal of WEP and GPO.

That group includes:

• Teachers and school administrators
• Firefighters and police officers
• Certain federal civil service retirees
• Workers with employment histories tied to non-covered or foreign social security systems

As of July of last year, the Social Security Administration (SSA) reported having sent more than 3 million payments totalling $17 billion to eligible recipients.

Social Security back pay 2025: Bottom line

For now, affected taxpayers must follow existing IRS rules and report retroactive payments as income on their 2025 returns. The bill has been introduced and referred to the U.S. House Ways and Means Committee.

If the proposal becomes law, it could allow affected retirees to reduce their 2025 taxable income. (Though the exact rules and guidance for that would have to come through IRS implementation.)

But remember: Whatever happens, this proposal doesn’t change how Social Security is taxed in general. Up to 85% of your benefits can be subject to federal income tax, depending on your income, and some states still tax Social Security.

But…for retirees caught in the middle of a major policy fix and a longstanding tax rule, it could mean the difference between a restored benefit and a surprise bill from the IRS.

Read More

• The Social Security Fairness Act and Your Taxes
• How Social Security Benefits Are Taxed: 6 Points to Know
• Calculating Taxes on Social Security Benefits
• What the New Senior Tax Deduction Means for Medicare IRMAA

The Social Security program has been expanded, updated, or shored up by almost every occupant of the Oval Office for over 90 years. Most presidents in the modern era have left a unique fingerprint on your monthly check.

From Franklin D. Roosevelt’s historic stroke of a pen in 1935 to the recent tax-cutting measures of the Trump administration in 2025, the program has evolved from a simple safety net into a complex system of retirement, disability and health insurance.

Think you know the history of your benefits? We’ve put together a quick, 8-question challenge to see if you can match the policy to the president.

And don't worry if you miss an answer; you can follow the links below the quiz to brush up on your knowledge of the program and how presidents helped shape the program.

More on Social Security, from the Kiplinger team:

• Presidents and Social Security: How Presidents Have Impacted America's First Social Insurance Policy
• Does Donald Trump Claim Social Security Benefits?
• Social Security Fairness Act Payments Checklist: Nine Things to Know
• New $6,000 'Senior Bonus' Deduction: What It Means for Taxpayers Age 65 and Older
• When Will Social Security Run Out of Money? And Medicare?
• How Much Would Social Security's 2033 Shortfall Cost You?
• What's My Social Security Full Retirement Age (FRA)?
• The Average Social Security Check by Age
• How Your Social Security Check Changes at Ages 62, 65, 66, 67 and 70
• Six Changes to Social Security in 2026

As people age into their 60s, they face a significant decision: When should they claim Social Security benefits and collect monthly payments?

This is not a decision to take lightly. What you do can easily swing lifetime benefits by $200,000 to $300,000 or more.

Yet, many people claim their benefits based not on a careful review of the numbers, but out of fear that Social Security will no longer be there when they're ready to claim it — or on the advice of friends or coworkers — or on overly simple break-even calculations.

This is a retirement decision you don't want to get wrong.

The cost of claiming too early

As you decide, it's best to understand the basics.

The Social Security Administration assigns everyone a full retirement age based on the year they were born. For most people these days, that's 67, but you don't have to wait that long to claim your benefit.

The government allows you to begin receiving a monthly payment as early as age 62, and nearly one-fourth of Americans do. You can also delay claiming until age 70.

Delaying until 70 can increase your benefit by 8% a year, or by 24% total for someone whose full retirement age is 67.

Claiming the benefit early does the opposite. Your benefit is reduced by 30% for life if you claim at 62. The reduction is less the closer you get to full retirement age, but it can still have long-term consequences. In addition to reducing your own benefit, claiming early can significantly reduce survivor benefits for a spouse.

If you want or need to continue working, you're penalized if you earn too much. In 2025, the annual earnings limit was $23,400. If you exceed that, the government deducts $1 for every $2 you go above the limit.

Once you reach full retirement age, though, you can earn as much as you like with no penalty.

Delaying isn't always right, though

It would be nice to be able to say the definitive answer is: Don't claim the benefit early. As with many things in life, it's not that simple. Sometimes circumstances arise in which claiming ahead of your full retirement age makes sense.

Health problems can sideline you from work. A layoff can do the same. Perhaps you're experiencing cash-flow problems, and an extra boost in income would be helpful, even if it's a 30% cut from what you'd receive by waiting a few more years.

Life expectancy can also be a consideration for some people. If your family has a history of shorter life expectancy, then that could be a reason to file for the benefit early.

However, most retirement decisions don't happen in a vacuum. You must look at the bigger picture and see how everything fits together when you make decisions.

Deciding when to take Social Security is no different. Delaying leads to a higher benefit, but it's not always a viable option for everyone.

More than a break-even calculation

People sometimes try to decide when to claim their benefit based on a break-even calculation. The break-even point is when the total amount you collect by delaying equals the total amount you would have collected by claiming the benefit earlier.

People who approach the decision this way can point out that there are 96 months from age 62 to 70, during which you could be collecting a benefit. The break-even point in that scenario would happen somewhere around age 80.

Basing a decision on the break-even point has its drawbacks, though, with longevity being one. It's not unusual these days for people to have retirements that last 20 or 30 years or longer. In those instances, you want as much money coming in monthly as possible.

Inflation can also come into play. Social Security recipients receive a cost-of-living adjustment (COLA) each year, but those don't always keep up with inflation. As everything becomes more expensive over time, it's better to have the higher benefit.

The spousal and survivor benefits most couples miss

Social Security spousal and survivor benefits are another factor to consider, but many people don't take this into account when they claim early.

If you pass away, your spouse can receive your benefit rather than their own if yours is higher. In that case, the higher your benefit is, the better, because it will last not just for the remainder of your life, but for the remainder of your spouse's life, as well.

Coordinating these decisions between the two of you can be a good move. For example, if one spouse takes the benefit at 62 and the other delays as long as possible, then, regardless of which spouse passes away first, the other will be guaranteed the larger benefit.

Taxes can reduce your benefit

People often don't realize that at least a portion of their Social Security benefits can be taxed, depending on overall income.

For a single person, up to 50% of Social Security is taxable if their combined income is $25,000 to $34,000. Up to 85% is taxable if their combined income is $34,000 and higher. For a married couple filing jointly, up to 50% is taxable if their income is from $32,000 to $44,000. Up to 85% is taxable if their income is $44,000 and higher.

It's important to be aware of this in case you're on the verge of exceeding an income level at which taxes either kick in or go higher.

For example, you might avoid making another withdrawal from your IRA during the current tax year if that money would push you over the threshold, causing you to pay higher taxes on your Social Security.

Social Security should anchor a retirement paycheck

Social Security won't replace your current paycheck — not even close. Generally, it will equal about 40% of your pre-retirement income.

But it does serve as a good anchor for your overall retirement income, supplementing pensions, annuities or any savings you might have. It's often best used to cover essential living expenses as part of a coordinated retirement paycheck strategy.

Regardless of what happens with other investments in the market, Social Security will be there, providing some stability.

A decision worth getting right

Ultimately, the question retirees need to ask is not: "When should I claim Social Security?"

A better question is: "How does Social Security fit into a sustainable lifetime income plan based on my health, spousal needs, taxes, savings and risk tolerance?"

This is a big-picture decision, not one to make in isolation.

Once claimed, Social Security decisions are largely irreversible. That's why it's a good idea to consult with a financial professional who can help you determine what makes the most sense for you.

Taking time to evaluate the full picture can provide greater confidence, security and flexibility throughout retirement.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Related Content

• Six Changes to Social Security in 2026
• Eight Strategies for Deciding When to File For Social Security
• How Your Social Security Check Changes at Ages 62, 65, 66, 67 and 70
• Are Your Retirement Numbers Not Looking Good? A Financial Adviser Runs Through Your Options
• Will You Have a Retirement Income Gap? How to Fill It

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Social Security claiming decisions are often described as "permanent," and in most ways, they are. Once benefits begin, the rules governing reductions, delayed credits and spousal coordination leave little room for correction.

Yet this narrative misses an important truth: The Social Security Administration does provide two limited but powerful do-over opportunities that can allow claimants to change course when circumstances change or decisions were made too quickly.

Those two rules are withdrawal of an application and voluntary suspension. They are often misunderstood, frequently misapplied and sometimes overlooked entirely by consumers and professionals alike.

If used correctly, they can preserve long-term income, protect spouses and undo early claiming mistakes. If used incorrectly, they can create confusion, unexpected repayment obligations or lost benefits.

Understanding the differences between these rules, and when each is applicable, is essential to sound Social Security planning.

Rule No. 1: Withdrawing an application, the one-time reset button

The first do-over option, withdrawing or canceling an application, applies early in the claiming process. It allows someone who has already filed for Social Security to essentially erase that filing as though it never happened.

How it works. The withdrawal of application is available up to 12 months after a retirement or spousal benefit has been approved (the first month of entitlement).

The claimant must file a formal request with SSA and repay the money they and their family received, as well as money withheld for Medicare premiums, taxes and garnishments.

If any medical expenses were covered by Medicare Part A during this time, those will need to be repaid to Medicare as well, including any benefits paid to a spouse or dependent based on that record.

Once approved, the withdrawal wipes the slate clean. The claimant can later refile at a higher age, restoring eligibility for delayed retirement credits and higher lifetime benefits.

Key characteristics:

• Available only within 12 months of first entitlement
• All benefits must be repaid, including auxiliary benefits
• Can be used only once per lifetime
• Applies to retirement and spousal benefits (not survivor benefits)

When this rule is most useful. This rule is often used when someone claims early (because of job loss, fear that Social Security will "run out" or receiving incomplete advice, for example) and then realizes the long-term cost of early claiming. It can also be helpful when health, income or marital circumstances change soon after filing.

For example, a worker who claims at 62 but returns to high-earning employment months later may discover that the retirement earnings test is withholding benefits while permanently locking in a reduced benefit.

Withdrawing the application allows that person to step back, wait and later claim at a higher age.

Important cautions. Withdrawing an application is not free and is not automatic. Repayment can be substantial, and some claimants are surprised to learn that benefits paid to others, based on the claimant's earnings record, must also be repaid.

Because the rule is available only once, using it casually or without a long-term plan can eliminate a valuable future option.

Rule No. 2: Voluntary suspension, pausing to earn more

The second do-over rule, voluntary suspension, operates very differently. It applies later in the claiming age timeline and does not erase a filing.

Instead, it allows someone who has already claimed benefits to pause payments and earn delayed retirement credits going forward.

How it works. Voluntary suspension is available only after reaching full retirement age (FRA). Once FRA is reached, a claimant who is already receiving retirement benefits may request that payments be suspended.

During the suspension period, benefits grow each month, at a rate of 8% per year until age 70, when delayed credits stop accruing.

Unlike withdrawal, there is no repayment requirement for past benefits already received.

Key characteristics:

• Available only at or after FRA
• No repayment of prior benefits
• Benefits resume automatically at age 70 (or earlier if requested)
• Delayed retirement credits are accrued during suspension

The post-2015 rule change. Before 2016, voluntary suspension could be used as a spousal coordination strategy, allowing a worker to suspend while a spouse continued collecting spousal benefits. Congress eliminated that strategy in 2015.

Today, when a worker suspends benefits, all auxiliary benefits on that record are also suspended, including spousal and child benefits. This makes voluntary suspension primarily an optimization tool for the individual, not the entire household.

When this rule is most useful. Voluntary suspension is most effective for individuals who:

• Claimed at FRA but later want to increase their benefit
• Continue working after claiming and no longer need the income
• Experience improved health or longevity expectations

For example, someone who files out of caution prior to FRA, but then realizes they can afford to wait, may suspend their benefits at FRA or later. They do not need to repay any benefits.

While suspended, their payment will accumulate delayed retirement credits up until age 70, when they then restart collecting.

Withdrawal vs suspension: A critical distinction

Although both rules provide flexibility, they are not interchangeable:

Understanding which rule applies, and when, is essential to avoiding costly mistakes.

Why these rules matter more than ever

Today's retirees face longer lifespans, more complex family structures and greater reliance on Social Security as a foundational income source. Yet many still claim too early, often without understanding the long-term consequences.

These two do-over rules exist because Congress and the SSA recognize that life happens. Beneficiaries' health changes, employment resumes, spouses pass away and financial realities evolve.

The rules are narrow by design, but they provide meaningful protection for those who understand them.

For professionals advising clients, and for individuals making their own decisions, these provisions underscore a broader lesson: Social Security claiming is not just a filing event; it is an income planning strategy. Knowing when a do-over is available can be the difference between locking in regret and reclaiming opportunity.

Related Content

• Is Your Retirement Plan Based on Social Security Fact or Fiction?
• When To Take Social Security Payments: Your Age Matters
• Two Ways To Stop and Restart Social Security
• Still Working While Receiving Social Security? A Financial Adviser's Guide to the Earnings Test
• How Divorced Retirees Can Maximize Their Social Security Benefits: A Case Study

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Each week, in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week she's looking at six questions on the taxation of Social Security benefits. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Are all Social Security benefits fully tax-free?

Question: I am retired and receive monthly Social Security benefits. I heard they are now fully tax-free for federal income tax purposes. Is that correct?

Joy Taylor: Unfortunately, no. President Trump promised to make the benefits fully tax-free. But the complex process that Republican lawmakers in Congress used to pass the "One Big Beautiful Bill" last July didn't allow for this change.

2. How much of my Social Security benefits are taxed?

Question: I receive monthly Social Security benefits. How much of the benefits will be taxed when I file my 2025 Form 1040?

Joy Taylor: It depends on whether you file a single return or a joint return and on the amount of your provisional income. Provisional income is generally equal to the combined total of (1) tax-exempt interest, (2) 50% of your Social Security benefits and (3) other non-Social Security income items that make up your adjusted gross income, minus certain deductions and exclusions.

For single filers, if provisional income is less than $25,000, then the full amount of Social Security benefits are tax-free. If provisional income is between $25,000 and $34,000, then up to 50% of the benefits is taxable. If provisional income is over $34,000, then up to 85% of the benefits is taxed.

For joint filers, if provisional income is less than $32,000, then the Social Security benefits are fully tax-free. If provisional income is between $32,000 and $44,000, then up to 50% of the benefits is taxable. If provisional income is over $44,000, then up to 85% of the benefits is taxed.

3. Why are the provisional income figures so low?

Question: I have been receiving Social Security benefits for many years. I noticed while figuring the tax on my benefits that the $25,000, $34,000, $32,000 and $44,000 provisional income thresholds never change. Why is that?

Joy Taylor: Many tax breaks and income levels are indexed to inflation each year. But not the provisional income thresholds for taxing Social Security benefits. For decades, they have stayed static at $25,000, $34,000, $32,000 and $44,000. Democrats have proposed bills over the years to raise the thresholds, but they never pass. That’s because the bills also include payroll tax hikes on upper-incomers, which make the bills a nonstarter with Republicans.

4. How do I calculate taxable benefits when I have Medicare premiums taken out?

Question: I am retired and receive Social Security benefits. I have my monthly Part B Medicare premiums paid from my Social Security benefits, thus lowering the amount of benefits I receive each month. Which figure do I use to determine the amount of my Social Security benefits that might be subject to federal tax?

Joy Taylor: You are not alone. Most Social Security beneficiaries have their Medicare premiums deducted from their monthly Social Security checks. To calculate the amount of Social Security benefits for federal income tax purposes, you would use the amount prior to the reduction for Medicare premiums. You can find this number in box 5 of the Form SSA-1099 that you receive.

5. How do states tax Social Security?

Question: I live in Virginia and I just started receiving Social Security benefits last year. I know I have to pay federal tax on the benefits, but how does Virginia tax them?

Joy Taylor: Most states, including Virginia, exempt Social Security benefits from state income tax. But not all do. The eight outliers that tax all or part of the benefits are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont. Many of these states have exceptions based on income figures.

See States That Tax Social Security Benefits in 2026

6. How do I request tax withholding from Social Security benefits?

Question: I want to have federal income tax withheld from my Social Security benefits. How do I request this?

Answer: Fill out Form W-4V to voluntarily request that federal tax be withheld from your Social Security benefits, and mail it to your local Social Security office or drop it off in person. You can elect to have 7%, 10%, 12% or 22% of your monthly Social Security benefits taken out.

Alternatively, if you have an online Social Security account, you can request changes to your withholding at: https://www.ssa.gov/manage-benefits/request-withhold-taxes

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor roundups. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

More Reader Questions Answered

• All Ask the Editor Q&As
• Ask the Editor: What Medical Expenses are Deductible?
• Ask the Editor: Questions on the $6,000 Senior Deduction
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Questions on SALT Deduction
• Ask the Editor: Questions on Inherited IRAs
• Ask the Editor: Questions on Home Sale Tax Break

The start of retirement is an exciting time.

For years, you worked and perhaps raised a family while always keeping an eye on the future.

You consistently set aside money, with the express purpose of funding your lifestyle during your golden years.

Now, with retirement near, or if it's already begun, you're ready to put those investments to use for both necessities and cherished bucket list items.

But all investments carry some degree of risk. They can lose value, sometimes significantly, when markets fluctuate.

When you're young, with years of investing ahead of you, it can be easier to take those losses in stride. You know you'll likely recover them over time.

But when the market experiences a substantial decline, the outcome can be quite different for those nearing or just beginning retirement. Once you stop contributing to investment accounts and start taking distributions, it can be harder to recover from a big loss.

A portfolio that was supposed to help provide income for a long retirement could come up short.

The possibility that ill-timed market declines could affect the longevity of your nest egg is known as sequence of returns risk, which can pose a serious threat to retirement success.

What is sequence of returns risk?

Sequence of returns risk is the danger that poor investment returns early in retirement, combined with regular withdrawals, can deplete your portfolio much faster than anticipated.

Even if your long-term average return reflects a solid performance, early losses could mean you'll have to sell assets at a lower value, reducing the size of your portfolio and limiting your ability to recover when the market rebounds.

No one can predict what the market will do from one week to the next, much less in the years ahead. This means that two retirees with identical portfolios and withdrawal strategies could experience substantially different outcomes based solely on the sequence of returns they encounter at the time they choose to retire.

The chart shows how the sequence of returns could affect two hypothetical retirees with the same $1 million portfolio (fully invested in the S&P 500 index) and a $75,000 annual withdrawal rate. The striking difference in their balances after 10 years illustrates the challenge that sequence of returns risk presents.

Note: These hypothetical examples are provided for illustrative purposes only. Source: finance.yahoo.com

How can you avoid this?

The worst way to deal with sequence of returns risk is to cross your fingers and hope that the market will stay strong, or at least stable, at the start of your retirement.

Winging it is not the way to go, and it could make matters worse if you make decisions based not on sound planning but on emotions, such as denial, fear or despair.

Preparing for the possibility that the market could decline at just the wrong time is critical. That means building plenty of flexibility into your plan so you don't become locked into taking portfolio withdrawals that require selling at a loss. Some strategies that can give you that flexibility include:

Drawing from safety assets

Pulling from cash reserves, short-term bonds or other safety assets can give your riskier assets time to recover from a loss.

The tricky part is deciding what portion of your investment should be parked in safety vehicles.

During employment, the general rule is to keep three to six months of income in liquid investments, but in retirement, that might not be a sustainable strategy.

If the markets were to rebound fairly quickly, as they did after the 2020 COVID-19-related crash, you'd be OK. But your money likely wouldn't last through a longer slump, such as the 2008 financial crisis.

You might want to look at a "bucket" strategy that allocates funds for use during specific (short-, mid- and long-term) phases of your retirement. A knowledgeable financial adviser can help you determine what your income plan requires and how to invest with both safety and growth in mind.

Implementing an efficient withdrawal strategy

When multiple accounts are available, tax-savvy retirees typically draw from their taxable assets first, then tax-deferred accounts (401(k), 403(b), traditional IRA, etc.) and finally, their Roth accounts. But diverging from this strategy during a market downturn could help you prevent losses from affecting your overall retirement outlook.

Accessing funds from a tax-free Roth account during a downturn might help you manage tax bracket creep, reduce tax exposure and avoid triggering the Medicare IRMAA surcharge and potential taxes on a portion of your Social Security benefits, keeping more money in your pocket.

This strategy can also allow your tax-deferred assets to recover and preserve your traditional IRA for future growth.

Coordinating withdrawals with Social Security

The market has no impact on Social Security benefits, making these a reliable income source. When you choose to claim those benefits is an essential part of retirement planning.

If the market is strong, and you can get the income you need from your investment gains, you might decide to delay filing for Social Security. But claiming your benefits sooner might make sense during a down year if it helps you reduce withdrawals from your investments.

It's definitely worth running the numbers for various scenarios so you understand your options.

Proactively managing RMDs

A required minimum distribution (RMD) is a government-mandated amount that retirees must withdraw each year from certain tax-deferred retirement accounts, generally starting at age 73.

These required withdrawals can force retirees to sell assets during a market downturn, potentially locking in losses.

Proactively allocating a portion of your tax-deferred accounts to safety assets is one way to prepare for this potential pitfall.

Another is to take your distributions during market highs instead of on a predetermined, inflexible schedule.

You might want to consider the benefits of completing a Roth conversion before you reach the age at which RMDs become a factor.

Better prepared than scared

Experiencing a market downturn early in retirement can be damaging, but it doesn't have to ruin your future. If you've recently retired or are close to retirement, there are steps you can take to preserve the longevity of your nest egg.

The sooner you make the necessary adjustments, the better off you'll be. Don't hesitate to ask for professional guidance if you need help evaluating the various strategies that can protect you and your family.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

You could be in for surprise taxes if you're planning for retirement in 2026. And we're not talking about common tax pitfalls, like taking required minimum distributions (RMDs) that force withdrawals from your individual retirement accounts (IRAs). (Though those certainly are important).

Several new federal policy changes could hike your retiree tax bill this year. For instance, under the 2025 Trump/GOP tax and spending bill, your "senior bonus" deduction may be lower than expected due to income phase-outs, indirectly resulting in an overall increase in Social Security benefit taxes.

For high-earning retirees still in the workforce, 2026 is the year the mandatory "Roth catch-up" mandate could arrive. Employers can start requiring you to contribute your catch-up contributions to a Roth account in this final year of implementation.

These three new retirement tax traps for retirees go beyond the basics, so let's look at how you might avoid them in 2026.

Related: Don't Overpay the IRS: 6 Tax Mistakes That Could Be Raising Your Bill

1. The SECURE 2.0 Roth catch-up contributions for 2026

About one-fifth of Americans 65 and older work, according to Pew Research, and if that's you, you'll want to watch out for the new high-earner Roth catch-up rules in 2026.

What's changed? Under federal tax law, if you're 50 or older, you can make catch-up contributions to your employer-sponsored retirement savings account (like a 401(k), IRA, etc.). However, starting this year, high earners may be subject to a "Roth mandate," which requires their catch-up contributions to be made to a Roth account, using after-tax funds.

The SECURE 2.0 "Roth mandate rule" won't be fully implemented until 2027, but employers must start complying as of January 1, 2026.

Here's who's affected by the new Roth rule on catch-up contributions:

• Workers (including retirees) who are 50 and older with a 401(k), 403(b), or governmental 457(b) plans, with
• Income of $150,000 or more from their current employer in the prior year.

Here's how to avoid the Roth mandate tax trap:

• Prepare for a smaller paycheck. With the shift to after-tax Roth catch-ups, that familiar pre-tax deduction may be gone on your year-end return. Plan now to adjust your 2026 household savings strategy.
• Watch for future Medicare premium spikes. Your adjusted gross income (AGI) might tick higher with after-tax Roth catch-ups compared to pre-tax contributions. Consider stopping catch-up contributions if the new rule applies to you, and look for investment options that don't affect AGI, like municipal bonds (though municipal bonds may impact your modified AGI calculation on Social Security benefits).
• Review your return for potential loss of tax benefits. Key 2026 benefits — like the new "senior bonus deduction" (more on that later) — have income phase-outs. Without the benefit of a pre-tax contribution, you might not get the highest tax benefit possible.

But while there are certainly some drawbacks, Roth contributions mean you can withdraw that money tax-free in retirement. That's why there are six reasons why you might convert your IRA to a Roth this year.

2. Social Security 'senior' tax deduction phase-outs in 2026

When the 2025 Trump tax bill was signed, there was initial confusion about whether federal taxes on Social Security benefits would be eliminated. While the Trump law didn't end the tax on Social Security benefits, a temporary new federal deduction was created, called the "senior bonus deduction."

What's changed? The idea was that the deduction would lower the amount of income subject to Social Security benefits tax by up to $6,000 per qualifying individual. The problem with this strategy is that not all retirees are eligible for the new bonus deduction.

For instance, single filers must make under $75,000 in modified adjusted gross income (MAGI) per year ($150,000 MAGI if married filing jointly). After that, the deduction begins to phase out.

Consequently, retirees who anticipated the senior bonus deduction lowering (or even "eliminating") their Social Security benefit taxes might end up with a higher tax bill if they aren't aware of the income phaseouts (and other eligibility requirements).

Here's what you can do to avoid this Social Security "senior bonus" tax trap:

• Avoid any extra withdrawals from an individual retirement account (IRA). If your household income is hovering just below the phase-out lines of the "senior bonus" deduction, hold off on withdrawing from an IRA that could wipe out the new tax break.
• Use a qualified charitable distribution (QCD). If you're at least 70 ½, you might use a QCD from an IRA to not only satisfy your RMD rules, but also to lower your AGI and keep yourself below the taxable thresholds for Social Security benefits and the bonus deduction.
• Review your investment strategy. Large taxable events, like Roth conversions or significant capital gains, should be strategically sequenced over time. Alternatively, if you can harvest capital losses to offset those gains, you can keep your income below the $6,000 bonus deduction phase-out limits (and maybe reduce taxation on Social Security benefits, too).

Despite the confusing Social Security Administration (SSA) email sent early last year, Social Security benefits remain federally taxable, up to 85%. Knowing the tax rules can help you avoid a surprise Social Security tax bill in retirement.

3. State tax conformity in 2026: Does your state follow the 'senior bonus' deduction?

States have the option to follow all, part, or none of the tax policy changes enacted in the 2025 Trump/GOP tax and spending bill. This is another opportunity for a potential "tax trap" on your state income tax bill at the end of the year (if you have one).

For instance, Virginia has temporarily halted automatic conformity with federal tax law, meaning residents will need to add back any 2025 Trump tax law changes to their state income returns during the 2026 filing season.

So if, say, a 70-year-old single filer who lives in Virginia has $55,000 in taxable income and qualifies for the "senior bonus" deduction:

• Federal taxes could allow a $6,000 "senior bonus" deduction, resulting in $49,000 federal taxable income.
• However, Virginia state income tax would add back that $6,000 deduction, resulting in $55,000 state taxable income.

*Note: This is a simplified example to demonstrate the difference between conformity vs. nonconformity tax rules. Actual federal and state tax positions may differ.

What's changed? While nonconformity with federal tax policy isn't a new development, more states are choosing not to adopt all the 2025 Trump tax law changes due to state budgetary concerns. Consequently, managing two different financial identities — one for federal, one for state — may be a more prevalent concept for many retirees in 2026.

Here are a few steps you can take to mitigate the state conformity tax trap:

• Working retirees should verify their state withholding. Don't let your employer's payroll system only account for federal withholding. Manually increase your state-level withholding (if necessary) or increase your quarterly estimated withholding (if you pay income taxes via that method).
• Use the health savings account (HSA) "Bronze Switch." The Trump/GOP tax bill expanded HSA eligibility to include Bronze health plans beginning this year. That means if your state has high income taxes but follows federal HSA rules (most states do), consider maximizing your HSA contributions to help lower your AGI for both federal and state purposes.
• Review if your state is adopting the federal "senior bonus" deduction. If your state doesn't allow the senior bonus, scale back any large taxable events. For instance, if you plan on converting an IRA to a Roth this year, convert up to the amount where your state tax bill remains manageable.

There may be other tax pitfalls as states continue to weigh in on whether to conform to federal tax law changes. Consult with a qualified tax professional if you have questions about your financial position.

Read More

• An HSA Sounds Great for Taxes, But It Might Not Be Right for You
• When to Hire a Tax Pro: The Age Most Americans Switch to a CPA
• Social Security Tax Limit for 2026: What the Higher Cap Means for Your Paycheck

If you are a financial professional or you're piloting your family's financial ship, statistics and survey results can help you prove a point to clients or family members.

Take the survey results below, which highlight the disconnect between what advisers say they do and what clients perceive regarding advice on when to claim Social Security.

According to a study by the Alliance for Lifetime Income:

• 92% of financial professionals say they help clients decide when to claim Social Security
• Only 22% of clients say their adviser helped them the most when making that decision

This gap shows that while advisers believe they are providing effective guidance, most clients either do not recognize it or do not feel it was the primary source of help.

To manage this situation properly, let's frame it first from the client's perspective and then from the adviser's.

Closing the advice gap: The client's perspective

As a client, your first step should be to log on and set up an account (both for yourself and your spouse/partner) at SSA.gov. Here you can view and check the accuracy of your accounts.

First, verify that every year's earnings are correct, because missing or incorrect earnings can reduce your benefits. If you find errors, you can request corrections — you'll need the proper documentation, such as your W-2 and/or tax returns.

Second, confirm your full retirement age (it's likely to be 66 or 67 depending on your birth year). This affects when you can claim full benefits without any reductions.

Keep in mind that as a client of an advisory firm, you should not assume your financial adviser will automatically cover Social Security. You should bring it up explicitly — after all, it is your money and your future that are at stake.

A good way to position this with your adviser is by phrasing it like this: "I want to make sure we analyze my/our Social Security claiming options as part of my/our complete retirement plan."

You should then request a formal analysis of your Social Security benefits. Most firms have software that can carry this out without including additional complexity to the topic.

In addition, the SSA.gov site has a retirement estimator and benefit calculators to model and calculate personal customized scenarios.

As you collaborate with your adviser, request a break-even analysis and lifetime benefit comparison for claiming at different ages. We would suggest asking for scenarios that include:

• Both spouses claiming early
• One spouse delaying until 70
• Claiming survivor benefits
• Work scenarios (e.g., continuing to earn income) and their tax implications

Research often cites more than 500 unique claiming permutations for a typical couple. Following the steps above should give you the data and analytics to make the best and most prudent decision for you and your family.

However, Social Security, and the various claiming strategies that may accompany it, are only one component of a successful retirement strategy. Participating fully in a workplace qualified retirement plan (QRP), such as a 401(k), and saving diligently are also vital.

Closing the advice gap: The adviser's perspective

There are several practical steps advisers can take to close the Social Security disconnect between what they think they provide and what clients perceive.

First, make Social Security a visible part of the plan you offer to retirees and soon-to-be retirees. We suggest including Social Security analysis in every retirement plan review.

Secondly, put it in writing. Behavioral experts have cited that clients often don't recognize verbal advice as formal guidance. By documenting your discussions, you are formally conveying the importance that Social Security claiming strategy plays in the overall success of a comprehensive retirement plan.

Your written retirement plan should include:

• Recommended claiming ages
• Rationale (longevity, survivor protection, tax impact)
• Integration with other income sources

Step three is to simplify plans using dedicated tools and software programs. Popular platforms such as eMoney and MoneyGuide Pro have great graphics and analytics that present break-even charts and lifetime benefit comparisons, enabling clients to see the value of a plan more easily.

Advisers can also log on to SSA.gov with their clients to review the retirement estimator and benefit calculators, and programs such as SS Analyzer, Income Insight and Maximize My Social Security may also provide useful information before finalizing a decision.

Finally, advisers must continue to educate clients proactively. "We covered that already" does not mean we do not need to periodically refresh and revisit these topics — especially when dealing with Social Security options.

For example, advisers can host webinars or workshops on claiming strategies. And providing one-page guides explaining strategy options, income impact and tax implications should become a standard portion of the client annual review packet.

Social Security is not an afterthought

The gap between advisers and clients on Social Security claiming strategies is clear: Most advisers believe they provide guidance, yet few clients recognize or act on it. This disconnect is not just a communication issue — it is a missed opportunity to improve retirement outcomes.

Clients should proactively ask for detailed analysis and written recommendations. Advisers must ensure Social Security planning is visible, documented and integrated into the overall financial plan.

When both sides engage intentionally, Social Security becomes a powerful tool rather than an afterthought.

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• Social Security Payment Schedule for 2026
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• A 10-Year Retirement Planning Checklist
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

It's surprising, but many Americans lack basic knowledge of one of their most important sources of retirement income — Social Security.

While the benefits are widely used — official statistics show nearly nine in 10 Americans over age 65 receive them — few understand how to use Social Security effectively.

According to the 2025 Annual Retirement Study from the Center for the Future of Retirement, part of Allianz Life Insurance Company of North America, one in two Americans (55%) said they don't know much about Social Security or how it will help fund their retirement.

For example, some believe they'll start receiving checks automatically when they stop working. They don't realize that everyone has decisions to make around when to start claiming the benefit and how it will fit into their overall retirement strategy.

Having a plan for Social Security is essential. Otherwise, there's a risk you won't use the benefits effectively during retirement.

Here are three common misconceptions about Social Security. Once you understand how it all really works, you'll be in a far better position to know how to work your benefits into your retirement strategy.

1. The age for receiving full Social Security retirement benefits

The age at which you start claiming Social Security benefits affects how much of your full benefit, called your primary insurance amount (PIA), you will receive. At your full retirement age (FRA), you can claim the PIA you have earned through your work history.

For the average retiree in the United States in 2025, the monthly benefit was a little under $2,000.

While the 2025 Annual Retirement Study found that 55% of Americans believe the age for receiving full retirement benefits is 65, this is not true. Full retirement age varies between age 66 and 67, depending on your birth year. You can check your specific FRA with the Social Security Administration.

That doesn't mean you can't start to claim Social Security earlier or later. Qualified beneficiaries (recipients of Social Security) can start retirement benefits based on their own work record as early as age 62, but their payments will be reduced by about 30%.

Alternatively, beneficiaries can delay claiming Social Security and receive delayed retirement credits (DRC), equivalent to 8% simple interest per year, until age 70.

2. The best time to start claiming benefits

Even though delaying claiming Social Security benefits results in larger monthly payments, that doesn't mean waiting to start taking Social Security is the best decision for everyone.

Yet, according to the Retirement Study, 73% of Americans say it is best to wait as long as possible to claim Social Security benefits.

There are trade-offs to claiming Social Security earlier or later.

The timing of the decision to start taking Social Security benefits is highly personal, and important factors such as financial assets, life expectancy and marital status must be considered.

For example, a retiree may consider delaying Social Security payments and funding the first part of retirement from other sources. If their IRA is their largest future income source, it may be prudent to spend down the IRA to reduce future required minimum distributions (RMDs).

But if a retiree is worried about sequence of returns risk (the effect of negative investment returns early in retirement), taking Social Security benefits earlier could help them limit how much they are withdrawing from their other retirement funds.

Married couples may choose to take one benefit before another. Some couples may decide to delay taking the larger benefit and start the smaller benefit earlier. This can be a factor in planning for what happens after a spouse passes away.

It's a hard mental shift to go from accumulating funds for retirement for decades to starting to withdraw from those accounts. Some retirees may find it difficult to start seeing their account balances decline.

They may want to start taking Social Security benefits for a guaranteed source of income that helps give them reassurance to spend.

3. Social Security is enough

Social Security benefits are not enough to fund retirement for most Americans. Still, according to the Retirement Study, 53% of Americans say Social Security will be a major source of their retirement income.

Social Security replaces about 40% of the average worker's wages when retiring at age 65. That means the remaining 60% must come from other sources.

And if you were an above-average earner during your working years (more than about $69,000 annually before retirement), an even greater share of income will need to come from outside Social Security.

That means retirees will still need to make some withdrawals from their retirement accounts to maintain their pre-retirement lifestyle.

When planning for retirement, an important step is determining your Social Security gap — the difference between your essential expenses and your Social Security payments.

To help close that gap, other reliable income sources, such as a pension or financial products that offer guaranteed retirement income (e.g., annuities), can be added to your overall portfolio.

How annuities could help

Work with a financial professional to create a retirement strategy that details how you will use guaranteed income from Social Security and determine whether it makes sense to add an annuity to the portfolio to help cover essential expenses.

Annuities can help meet long-term retirement goals by offering tax-deferred growth potential, a death benefit during the accumulation phase and a guaranteed stream of income at retirement.

That may help you feel more confident to use your other retirement assets to help live out your dream retirement.

By learning about the nuances of Social Security, you can better evaluate the trade-offs in retirement planning.

A financial professional can help you make those decisions and create a strategy to use Social Security to its fullest. That way, you can pursue your retirement dreams.

Allianz Center for the Future of Retirement conducted an online survey, the 2025 Annual Retirement Study in January/February 2025 with a nationally representative sample of 1,000 respondents age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k+.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When it comes to filing for Social Security, everyone should be taking steps to maximize their eligible Social Security benefits.

However, findings of a Center for Retirement Research at Boston College study estimating that more than $10 billion in benefits are left on the table each year make this more clear than ever. The issue of unclaimed benefits is even greater for women, for a multitude of reasons.

If you are a woman approaching retirement — whether you are single, married, divorced or widowed — it's critical that you review all of your eligible Social Security filing options to ensure that you're getting the most you are entitled to from Social Security.

For many women, identifying their optimal Social Security filing strategy may be one of the most important financial decisions they make when planning for retirement.

Why is maximizing Social Security benefits of particular importance to women?

Women earn less. The gender pay gap has slightly narrowed in the United States over the past 20 years or so.

In 2024, women earned an average of 85% of what men earned, according to a Pew Research Center analysis of median hourly earnings of both full- and part-time workers — a number that corresponds to an equal reduction in individual Social Security benefits.

Women have lower Social Security benefits. On average, the Social Security benefit for women 65 and older is just over $13,000 per year, compared to $17,000 for men of the same age, according to the Social Security Administration.

Women rely more on Social Security. Thirty percent of women 65 and older rely on Social Security for more than 90% of their income, compared with 23% of men of the same age. For unmarried women, including those who are widowed, divorced or have never married, this number jumps to 36%.

Women leave the workforce more often to serve as caretakers. More than 61% of family caregivers are women, according to the 2025 AARP report Caregiving in the U.S., making this group particularly susceptible to loss of income and lower personal benefits from Social Security.

Women live longer. A longer life expectancy requires an increase in retirement income to support additional costs for housing, medical and long-term care expenses.

While there's no changing these numbers in the near term, the good news is that there are specific strategies that can help you boost your Social Security income considerably over the long term.

A New York Life Wealth Watch survey found that nearly half of women would prefer to obtain financial advice from a professional — including advice for maximizing Social Security benefits.

Isn't it time to change that fact and bring home the highest-possible income during what may be the most financially challenging years of your life?

The ideal strategy is as individual as every woman, but below are a few tips to get started on a path to a more comfortable retirement.

Single women: It's all about longevity risk

The primary financial risk in retirement is often not the risk of dying young, but rather the risk of living too long and possibly outliving your savings. If you're single, outliving your money may be your biggest retirement fear — especially if you've never been married and must rely on your own savings and Social Security benefits.

Despite the common misconception that living expenses will decrease with age, expenses often rise as you get older due to the cost of long-term care and medical care associated with longevity, not to mention the rising cost of living that comes with inflation.

To help combat these challenges, consider these options:

Delay claiming to boost benefits. While the majority of women claim benefits at age 62, the earliest possible age to file, waiting until age 70 can increase your annual benefits by 8% a year, from full retirement age (between 66 and 67, depending on the year you were born) to age 70, provided by delayed retirement credits (DRCs).

Benefits may also increase due to annual cost-of-living adjustments (COLAs).

Turn to other savings first. You could draw from your savings or investments, such as your 401(k) or IRA, to bridge the income gap until you claim your benefits — unless these other funds are earning more than an 8% guaranteed annual return, the equivalent of the DRC.

Married women: It's critical to understand spousal and survivor benefits

If you're married, knowing whether you are eligible for spousal benefits is critical. Even if you did not qualify for your own Social Security benefit, because you had fewer than 10 years of earned income (for example, a stay-at-home mom), you may be eligible for a spousal benefit.

If your spouse were to predecease you, which is often the case since women typically outlive men, knowing how to maximize survivor benefits is important.

Eligible for spousal benefits? If your own benefit at full retirement age is less than 50% of your spouse's full retirement age benefit, you are eligible to collect an amount equal to 50% of your spouse's benefit.

In order to collect this spousal benefit, however, your spouse must be collecting their benefit at the time you file for spousal benefits, and you have to have been married for at least 12 months.

How to maximize survivor benefits. If your spouse defers their benefit to age 70, not only does their benefit amount increase by 8% per year (plus any increases due to COLA) from full retirement age to age 70, but their higher total benefit amount also represents your survivor benefit should they predecease you.

Your survivor benefit is equal to 100% of the benefit they were collecting at the time they passed. If they had not yet filed for their benefit, you would receive 100% of what their Social Security benefit amount had accrued to, provided you filed for survivor benefits at your full retirement age or later.

You can collect a survivor benefit as early as age 60. However, it will be a reduced amount as compared to filing when you reach your FRA or later.

Child and child-in-care benefits: These benefits are paid when caring for minors

If a parent files to collect their Social Security benefits while they have a minor child, the minor child is eligible to collect an amount equal to 50% of the parent's full retirement age benefit, until the child reaches age 18 (or 19 if still in high school).

This scenario often plays out as a result of second marriages, especially when a man remarries and has a child with a younger spouse.

However, there may be an additional Social Security benefit, called a child-in-care benefit. If a woman was a stay-at-home mom at the time her spouse filed for Social Security benefits, then she may be eligible to collect a child-in-care benefit equal to 50% of her spouse's benefit amount until the child reaches age 16.

If a child and child-in-care benefit are paid at the same time, then each benefit would be reduced due to the family maximum rules.

Divorced and widowed women: Know your requirements for eligibility

If you're divorced, you typically can't count on the financial resources of an ex-spouse. However, when it comes to Social Security benefits, you may have more options than you may think:

Claim ex-spousal benefits on an ex-spouse's earnings. If you're divorced but were married for at least 10 years and divorced for at least two years, you may be eligible to claim ex-spousal benefits on your ex's Social Security benefits — but only if you didn't get remarried and your own benefit at your FRA was less than 50% of your ex-spouse's benefit at their FRA.

If you remarried but that marriage also ended in divorce, you may once again have the option of claiming ex-spousal benefits from the highest-earning ex-spouse. (Of course, you can claim benefits on the earnings of only one former spouse at a time.)

Remarried after 60? Collect survivor benefits. If you remarry, you typically are no longer eligible to collect survivor benefits from a former spouse.

However, if you remarry after age 60 and your ex-spouse dies, you have the option to claim survivor benefits on the earnings of your ex-spouse, equal to 100% of their benefit amount, even if your ex-spouse had remarried.

In that scenario, both you and their new spouse may be eligible to collect 100% survivor benefits.

Women need to take charge when planning for benefits

If you were out of the workforce for any period of time — to be a stay-at-home mom, assist a family member as a caregiver or for any other reason — achieving an employment record of at least 10 years (40 quarters) is required in order to be eligible for any individual benefits.

It can sometimes be well worth the effort to take a full- or part-time job to complete the 10-year minimum.

Also note that, even if you begin to collect benefits at FRA, you may still be able to increase your future benefit amount because your benefit is based on your highest 35 years of indexed earnings, even if those earnings occur while you are collecting benefits.

Regardless of your marital status, as a woman, you likely face a longer lifespan and lower earnings than a man — both of which make maximizing your Social Security benefits particularly important.

If you have not yet filed a claim for benefits, consider these strategies as a starting point and talk to a qualified Social Security adviser to be sure you're doing all you can to ensure a more comfortable and secure retirement.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

It’s becoming less common for states to tax Social Security benefits, but eight states still do.

However, the tax treatment of Social Security retirement income can vary drastically from state to state. That’s mainly because many of these states won’t tax your Social Security if you meet specific income guidelines, and some states have more generous guidelines than others.

So, here’s how all eight states tax Social Security retirement income.

Colorado

Colorado Social Security benefits tax

Colorado taxes Social Security benefits, but some retirees won't have to pay. That’s because Colorado allows taxpayers 65 and older to deduct all their federally taxed Social Security. (Younger retirees, those under age 65, get a smaller tax break in Colorado.) The Centennial State currently taxes all taxable income at a flat 4.4% rate.

Retirees aged 55 to 64 can deduct up to:

• $95,000 (married filing jointly) or $75,000 (single filer) of Social Security benefits from their taxable income for tax year 2026.
• For taxpayers who exceed the above thresholds, the deduction is $20,000.

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Connecticut

Connecticut Social Security benefits tax

While Connecticut technically still taxes Social Security benefits, many residents won’t pay these state taxes in retirement. Whether you pay state income tax on Social Security in the Constitution State depends on your adjusted gross income (AGI) and your filing status.

• For married filing separately and single filers, Social Security benefits are not taxed in Connecticut if adjusted gross income (AGI) is under $75,000.
• For married filing jointly and head of household filers, Social Security benefits are not taxed with AGI below $100,000.
• If a taxpayer’s AGI is more than the Connecticut income threshold, no more than 25% of Social Security benefits are taxed.

Minnesota

Minnesota Social Security benefits tax

Minnesota taxes Social Security income that is considered taxable by the federal government. However, some Minnesota retirees qualify for a Social Security income subtraction when filing their state tax return. A taxpayer's subtraction is reduced by 10% for each $4,000 over the threshold (10% for each $2,000 of AGI over $54,160 for married filing separately).

Here are the threshold amounts subject to no social security tax, according to the Minnesota Department of Revenue:

• Married filing jointly filers are fully tax-exempt at less than $108,320.
• If you are married and filing separately, you are fully tax-exempt at $54,160 or less.
• Head of household and single filers are tax-exempt at less than $84,490.

(Note: Minnesota also has an "alternative method" for claiming a state subtraction. This method is based on your filing status and provisional income, which is your gross income plus tax-exempt interest and half of Social Security and Tier 1 Railroad Retirement benefits.)

Montana

Montana Social Security benefits tax

Montana’s income tax rate is 5.65% on income over $95,000 ($47,500 for single filers). That’s not great news for some retirees since the treatment of Social Security retirement income isn't as generous in Montana for 2026 as it is in most states.

• Taxpayers 65 and over only receive a $5,500 subtraction from federal taxable income.
• Several income deductions, including the partial interest income deduction for taxpayers aged 65 or older, were repealed in recent years.

New Mexico

New Mexico Social Security benefits tax

New Mexico technically taxes Social Security benefits, but many retirees won’t pay a dime to the state at tax time. That’s because the Land of Enchantment provides higher income thresholds for exempting Social Security benefits than other states.

• Single filers earning up to $100,000 per year won’t have their Social Security benefits taxed at the state level.
• New Mexico won’t tax Social Security benefits for joint filers who earn up to $150,000 per year.

Rhode Island

Rhode Island Social Security benefits tax

Rhode Island exempts Social Security benefits from state income tax for many retirees. Retirees who have reached full retirement age and meet income requirements aren't subject to state tax on Social Security benefits. Here are the most recent income thresholds:

• For joint filers, only those with an AGI of $133,750 or more are subject to state tax on Social Security benefits.
• For most other filing statuses, only retirees with a federal AGI of $107,000 or more pay state taxes on Social Security benefits.

Utah

Utah Social Security benefits tax

Utah taxes Social Security benefits, but some retirees may qualify for a Social Security benefits credit. There is a Social Security Credit Worksheet on the state’s website you can use to determine the amount of the credit you qualify for.

• Utah also offers a retirement tax credit of $450, but taxpayers can’t take this credit if they claim the Social Security benefits credit or the Military Retirement credit.
• Utah taxes all taxable income at a flat 4.50% tax rate.

Vermont

Vermont Social Security benefits tax

Not all retirees in Vermont pay state income tax on Social Security benefits. That’s because Vermont allows a full exemption of Social Security income from state taxation for retirees who meet income requirements. Here are the income thresholds for 2026:

• If you are married and filing jointly, your Social Security benefits are tax-exempt in Vermont if your AGI is $70,000 or less.
• Single and married filing separately filers qualify for a full exemption with an AGI of $55,000 or less.
• Single filers qualify for a partial exemption with an AGI up to $64,999 ($79,999 for joint filers).

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Whether it's being aware of your full retirement age, understanding spousal or survivorship benefits or just being aware of the annual cost-of-living adjustment (COLA), Social Security is complex. The social insurance program is also facing a few changes in 2026.

Starting in January, about 71 million beneficiaries will see a 2.8% COLA increase on benefits. This is expected to increase monthly benefits by an average of $56.

For the nearly 7.5 million Americans receiving Supplemental Security Income, increased payments will begin on December 31.

The announcement came later this year than usual due to the recent government shutdown, which marked the longest in our nation's history, lasting 43 days.

During that time, many recipients, especially retirees, wondered how future Social Security payments would impact their budgets.

While these annual adjustments are supposed to help offset inflation, they're not guaranteed and, therefore, should not be factored into your monthly income when mapping out your budget.

If, by chance, the COLA increases, you'll have a little extra money coming in. However, if there's no COLA, you won't be cut short.

Changes to full retirement age

Another major change coming in 2026 affects the full retirement age for claiming benefits. While you're eligible to start claiming benefits at 62, you won't receive your full benefit amount until you reach your full retirement age, which is calculated based on the year you were born.

For example, the full retirement age for someone born in 1959 is 66 years and 10 months. Starting in November 2026, the full retirement age for those born in 1960 or later is 67.

Understanding your full retirement age is key when strategizing how to claim benefits. As mentioned earlier, you can start drawing Social Security at 62, but you'll receive a reduced amount for the rest of your life — up to 30%, according to the Social Security Administration.

However, you'll receive 100% of your benefits if you wait until your full retirement age to claim. If you wait until 70, you can earn delayed retirement credits, which can increase benefits by 8% per year. Benefits will stop increasing after you reach age 70.

Knowing your full retirement age is also crucial should you plan to continue working while claiming benefits. In 2026, beneficiaries can earn up to $24,480 before getting penalized. That's up from $23,400 in 2025.

What's the best age to claim benefits?

So, how can you determine when the best age is to file?

This is the million-dollar question every retiree wants answered, but deciding when to claim is entirely dependent on your individual plan.

When I'm working through this issue with my clients, I ask them an array of questions, ranging from their personal health conditions, current and past, average life expectancies among family members and whether there are major health concerns with any immediate family members.

I also ask them to envision how they want to spend their retirement.

Based on those answers, my team and I create a plan best suited to their needs. The key to knowing when the right time is to plan.

Change to the income threshold

The SSA is also changing its maximum taxable income threshold from $176,100 in 2025 to $184,500 in 2026.

Also, the amount now needed to earn one Social Security credit is $1,890, up $80 from last year's $1,810.

Medicare Part B premiums are also projected to rise, which can impact the net amount Social Security beneficiaries receive.

With constant annual changes and more than 10,000 various claiming strategies, navigating Social Security can become complicated and overwhelming.

However, understanding how it factors into your retirement plan is crucial to ensuring you'll be able to afford retirement when the time comes.

Understanding how Social Security fits into your overall retirement plan is critical. Don't think of it as a safety net, but as a source of income. By asking the right questions and making decisions based on your individual circumstances, you'll be well-positioned to make the best claiming decision when the time comes.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For affluent retirees, Social Security is often treated as a minor piece of the retirement puzzle — something to claim whenever it feels convenient.

But the timing of those benefits can have a far greater impact than most realize. For high-net-worth retirees, deciding when to claim isn't just about maximizing income — it's also about managing taxes, preserving portfolio longevity and aligning lifetime income with estate and legacy goals.

When coordinated thoughtfully, Social Security can serve as both a reliable income stream and a valuable tax-efficiency lever in a broader retirement strategy.

The misunderstood asset in a high-net-worth plan

For many wealthy retirees, Social Security represents a small percentage of their total retirement income. As a result, they may see little reason to delay claiming or to integrate it into their overall financial strategy.

But that assumption overlooks two key facts: The lifetime value of Social Security can exceed $1 million to $2 million for many couples, and the way it interacts with other income sources can materially affect tax outcomes.

Because up to 85% of Social Security benefits can be subject to federal tax depending on a retiree's "provisional income," deciding when to claim affects not only cash flow but also total tax exposure.

In other words, even for clients with ample assets, timing can be a powerful driver of after-tax efficiency.

Timing Social Security with tax brackets in mind

High-net-worth retirees often have significant income from investments, real estate or business sales, all of which can push them into higher marginal tax brackets.

Claiming Social Security too early can unintentionally trigger higher taxes by stacking those benefits on top of other income streams.

A more deliberate approach might involve drawing from taxable accounts first, delaying Social Security until full retirement age or beyond. This can create an opportunity to perform Roth conversions or realize long-term capital gains at lower tax rates before benefits begin.

By age 70, when Social Security benefits reach their maximum, the retiree has often repositioned assets into a more tax-efficient structure, potentially lowering the taxation of benefits later.

The One Big Beautiful Bill Act (OBBBA) further elevates the importance of tax-aware timing. With its revised income thresholds, updated bracket structures and new rules governing the interaction between retirement income and taxable benefits, many affluent retirees may experience higher taxable income earlier in retirement.

This makes the sequencing of withdrawals and Social Security claiming even more consequential. For some, delaying benefits while taking advantage of lower-bracket years created under the OBBBA may help reduce lifetime taxes and preserve flexibility in later decades.

The ripple effects on Medicare and IRMAA

Social Security timing doesn't just influence income taxes, it also affects Medicare costs. The income-related monthly adjustment amount (IRMAA) surcharges are based on modified adjusted gross income.

When retirees layer Social Security income on top of other taxable withdrawals, they may find themselves paying hundreds or even thousands more in Medicare premiums each year.

Coordinating benefit timing with tax-efficient withdrawal strategies can help keep those surcharges in check.

For example, delaying Social Security while gradually converting pre-tax retirement accounts to Roth IRAs in the early retirement years can smooth income levels over time. Later, when benefits start, the retiree's taxable income (and therefore IRMAA exposure) may be lower.

​​Under the OBBBA, the updated Medicare income thresholds may cause IRMAA brackets to apply differently for high-income households. Retirees who previously sat comfortably below a surcharge tier may now find themselves closer to the edge.

This makes proactive planning essential, particularly for couples who expect fluctuating income due to required minimum distributions (RMDs), business sales or investment gains.

When earlier filing makes sense

While delay is often tax-efficient, it isn't always the best move. For retirees with shorter life expectancies, those seeking to fund long-term-care premiums or those interested in transferring wealth through gifting or insurance strategies, earlier claiming may make sense.

Some affluent couples strategically use early Social Security income to fund life insurance within an irrevocable trust, effectively transforming taxable income into a tax-free estate asset.

Others use the income to cover lifestyle expenses while leaving appreciated assets invested for potential growth or legacy purposes.

The OBBBA's adjustments unified credit and gift allowances, which may influence the calculus here.

For retirees planning to accelerate gifting or fund advanced estate strategies, the additional income from early Social Security can help support those transfers while preserving portfolio principal during years when exemptions and gift opportunities are most favorable.

Integrating Social Security into a legacy plan

High-net-worth families often focus heavily on legacy — for instance, how their wealth will support children, grandchildren or philanthropic goals. Social Security, though rarely part of that discussion, can indirectly strengthen legacy outcomes.

When retirees delay benefits, they reduce the need to draw from taxable accounts early on, potentially preserving capital gains assets that can later receive a step-up in basis. That small shift in withdrawal sequencing can translate into significant tax savings for heirs.

For married couples, the decision also affects survivor benefits. Maximizing the higher-earning spouse's benefit can provide greater financial stability (and a larger income base) for the surviving spouse, which can be especially important in families with a history of longevity.

With the OBBBA's updated estate and gift parameters, efficient income sequencing becomes even more valuable. Retirees who delay Social Security may preserve more taxable assets for step-up at death, or structure withdrawals to complement new estate thresholds.

Coordinating these decisions under the new rules can amplify the long-term legacy impact.

The importance of modeling and proactive advice

For high-net-worth retirees, Social Security should never be treated as an isolated decision. Instead, it's a moving part in a complex system that includes investment withdrawals, RMDs, Roth conversions, charitable giving and estate planning.

Each piece affects the others, which is why scenario modeling is crucial. The best time to evaluate Social Security strategy isn't at age 62 or 65, but in the years leading up to retirement, when tax-efficient adjustments can still be made.

Working with a financial professional who can model these interactions across multiple years and tax scenarios can reveal opportunities that might otherwise be missed. Even seemingly small adjustments in claim timing, withdrawal order or conversion schedules can produce meaningful long-term savings.

The bottom line

For high-net-worth retirees, Social Security is far more than a government benefit. It's an income source that, when strategically timed and coordinated with tax and investment decisions, can enhance efficiency, flexibility and legacy potential.

Rethinking Social Security timing isn't about chasing the highest monthly check. Instead, think of how you can align that benefit with the broader goals of wealth preservation and multigenerational success.

The OBBBA only magnifies the importance of making these choices thoughtfully.

With shifting tax brackets, evolving retirement rules and new planning opportunities, Social Security timing now sits at the center of an even more interconnected financial strategy.

By integrating Social Security into a tax-smart retirement framework, affluent retirees can make every dollar work harder, not just for themselves, but for the future they hope to leave behind.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When should you start taking Social Security benefits? For many retirees, that can seem like a no-win choice.

While delaying taking benefits gives you a higher benefit amount, many retirees can't afford to or don't want to delay receiving benefits until age 70.

But there is a proven, safe way to boost income while waiting for your benefits to begin: buying an income annuity that guarantees monthly income for either a set number of years or your lifetime.

Delayed benefits and your break-even point

There are three ages to be aware of. At 62, you can start taking reduced benefits, which are about 30% less than if you wait until 67, which is the full retirement age for people born in 1960 or later. Each year you delay past 67, up to age 70, you'll get a greater monthly payment.

If you wait until 70, you'll get about 24% more each month than if you took benefits at age 67. The difference between starting at 62 and 70 is huge: about 77% higher starting at 70.

The difference is locked in, so future cost-of-living adjustments (COLAs) will be applied to the higher base benefit.

Delaying payments has a cost, though, because you're giving up income for anywhere from one to eight years, and it takes time for the higher delayed benefits to catch up.

The break-even age varies from about 79 to 82 (give or take). For example, someone who started taking benefits at 70 will likely have received slightly less income by age 80 than someone who started at 62.

By age 83, however, the person who waited until 70 will be comfortably ahead, and the gap will keep growing. The break-even age for delaying benefits from age 67 to 70 is about 82.

If you're married, you also need to consider your spouse, and that's another argument for delaying benefits for the higher earner.

The Social Security Administration points out, "If you are the higher earner, and you delay when you start your retirement benefit, it will result in higher monthly benefits for the rest of your life. If you die first, it will result in higher survivor protection for your spouse."

Therefore, most people who are in poor health and unlikely to live past 80 shouldn't delay taking benefits unless the spousal benefit is the major concern.

But if you do have a good life expectancy, delaying benefits reduces the risk of running out of money as you age. By delaying, you sacrifice current income in return for a higher income in the future, plus bigger COLAs.

How income annuities can plug the gap

An income annuity generates more income than just about any other vehicle, partly because each payment includes both interest income and return of your principal.

Even the latter is valuable because it's hard to find a liquid deposit that would let you withdraw that much from your account penalty-free each month while earning a competitive interest rate.

While most people buy lifetime annuities, you may choose a set income term from five to 20 years. This is called a "period certain income annuity."

Here's an example. Jane, age 63, retires and invests $200,000 in a seven-year immediate annuity so she can delay taking Social Security until 70. She lists her husband as the beneficiary so he will continue to receive any remaining payments if she dies before the seven years are up.

Today, Jane can buy an immediate annuity that will pay $2,776.77 per month, including $2,379.69 in tax-free return of principal and $397.08 of taxable interest.

After seven years, the annuity will end and have no cash value. But it will have done its job to provide substantial guaranteed income, most of it tax-free, to fill the income gap until her Social Security benefits begin.

Another option for Jane is to choose a MYGA (multi-year guarantee annuity), a type of fixed-rate annuity.

If she placed $200,000 in a seven-year MYGA, she could earn up to 5.75%, which would produce $11,500 of taxable income each year from a contract that allows the owner to withdraw interest without penalty.

Additionally, many MYGAs allow the owner to withdraw up to 10% annually, without penalty, so she'd have flexibility if she needs more money. (Some of these annuities pay a slightly lower interest rate.) Ask your adviser about the liquidity provisions of the annuity you're considering.

A MYGA produces less income but preserves her principal. If Jane receives all the interest the annuity produces but doesn't touch the principal, she'll get her $200,000 back after seven years.

Annuities are issued by life insurance companies and thus are not guaranteed by federal deposit insurance, so review the issuer's A.M. Best financial strength rating before buying.

Life insurers are tightly regulated by the states where they're domiciled and have a strong track record of meeting their obligations.

Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed, and lifetime income annuities. Ken is a nationally recognized annuity expert and widely published author. A free rate comparison service with interest rates from dozens of insurers is available at www.annuityadvantage.com or by calling (800) 239-0356. The firm also offers an income annuity quoting service. There are no fees or charges for the firm's services; 100% of the client's money goes to work for them in their annuity.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.