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Social Security’s Role In Retirement

Social Security's Role in Retirement

When it comes to Social Security, there’s a big difference between the expectations and reality of re-retirees and retirees.

Only 33% of today’s pre-retirees expect that Social Security will be a major source of income.  But the reality is much different. Nearly 67% of retirees say Social Security is their major source of income.

Why are expectations so misaligned with reality?

The 2023 Retirement Confidence Survey highlights a variety of reasons, including the fact that most (73%) of today’s pre-retirees expect to keep earning a paycheck in retirement. Very few (30%) of retirees actually do.¹

That’s why, when we create a retirement strategy, we ask a lot of questions so we can better identify all your sources of income and better understand how you are approaching your next phase of life. We want to help close the gap between your expectations and what you may experience.

Social Security by the Numbers

Below, we have outlined our perspective on three of the most widely asked questions about Social Security to help you get a better overall understanding.

How much money can I expect?

The Social Security Administration has several tools that can help you estimate your retirement benefit. The key question is, what age are your considering to start receiving benefits? By using some illustrations, we can help you better visualize the pros and cons of starting at 62 or waiting until age 70.

One factor that can’t be overlooked is that Social Security can be a family benefit. Once you start taking Social Security retirement benefits, some of your family members may also qualify to receive benefits based on your work record.²


“What is more, I consider everything a loss because of the surpassing worth of knowing Christ Jesus my Lord, for whose sake I have lost all things. I consider them garbage, that I may gain Christ.”     Philippians 3:8


Are Social Security benefits taxable?

Yes. The taxation of Social Security benefits started in 1984. So depending on your income, your benefit may be subject to taxation. The table below shows how federal income taxes may apply.

Social Security Tax Rates³

The dollar amount thresholds have remained the same since taxes on benefits were introduced in 1984. They are not adjusted for inflation.

The percentage of all tax returns with taxable Social Security benefits reached 33% in 2017 (most recent data available), and is expected to increase to more than 50% by 2046. In 1999, fewer than 8% of all taxpayers reported taxable Social Security benefits.⁴

Tax Filing Status Table For Social Security in Retirement, 2023

So, what can you do? There are a number of potential ways to manage how your benefits are taxed. The simple way is to ensure your combined income is less than the threshold where taxes apply. Other ways can include having a detailed understanding of your retirement accounts and knowing when to tap them for income.⁵

We’re not tax experts (but we are associated with companies that are); however, there are a couple of widely known approaches that you may consider if you are concerned about your potential Social Security tax bill. We can help you better understand your retirement income strategy, and your tax professional can provide feedback on your specific situation. Or, our planning department can do a Tax Analysis.

Is Social Security going to change?

When the Social Security trustees release their annual report and provide an update on the program’s financial status, there will inevitably be an alarmist headline that reads, “Social Security Is Going Bankrupt.” But such a headline is a bit misleading. While Social Security does face some long-term funding challenges, there are a number of potential approaches that are being discussed to help the program. It is possible that one approach, or a combination of approaches, might be proposed in the years ahead.

Without Social Security, 21.7 million more people would live below the poverty line. At some point, we anticipate lawmakers will address the situation, and propose changes to one of the nation’s most successful, effective, and popular programs.⁶

  1. EBRI, 2023 Retirement Confidence Survey
  2. Social Security Administration, 2023
  3. Social Security Administration, 2023
  4. Congressional Research Service, 2020
  5. Investopedia, March 16th 2023
  6. Center On Budget and Policy Priorities, March 29th 2023

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