Social Security is the base of most retirement plans. But it is not meant to be your only source of income. Knowing how Social Security fits into your overall plan is one of the most important choices you will make as you near retirement.
What Social Security Actually Replaces
For the average worker, Social Security covers about 40% of pre-retirement income. If you earned $80,000 per year before retiring, expect about $2,600 to $2,800 per month. The exact amount depends on your work history and claiming age.
Most experts say you need 70% to 80% of your pre-retirement income to keep your lifestyle. The gap between Social Security and what you need must come from other sources. These include a retirement account, pension, or investment income.
This is general info to help with planning, not a guarantee. Your actual benefit depends on your earnings history.
Arizona's Social Security Tax Advantage
Arizona does not tax Social Security benefits at the state level. This is a real plus compared to states that do tax a portion. At the federal level, up to 85% of your benefit may be taxed based on your total income. But you will never owe Arizona income tax on your Social Security check.
This means Arizona retirees can often afford to delay claiming. Waiting raises your monthly benefit. And you do not have to worry about a bigger state tax bill.
When to Claim: 62, Full Retirement Age, or 70
The age you start collecting sets your monthly benefit for life:
- Age 62 (earliest): A reduced benefit for life. Roughly 25% to 30% less than your full retirement age amount.
- Full retirement age (66 to 67): You get 100% of your figured benefit.
- Age 70 (maximum benefits): About 24% to 32% more than your full retirement age amount, thanks to delayed credits.
Say your full retirement age benefit is $2,500 per month. Claiming at 62 drops it to around $1,750. Waiting until 70 pushes it to about $3,300. That is a lasting gap of over $18,000 per year. The right choice depends on your health, your money, and your other income sources.
Coordinating Social Security With Your Retirement Account
Your claiming choice should not happen alone. It ties straight to how you draw from your retirement account, pension, and other savings.
For example, say you retire at 62 and delay Social Security until 70. You need to bridge eight years of income from other sources. That might mean drawing from an IRA or 401(k) during those years. The payoff is a higher Social Security check for the rest of your life.
A financial professional can help model different paths. The goal is to line up all income sources so you pay taxes wisely and your money lasts as long as you do.
Spousal and Survivor Benefits
If you are married, your claiming plan affects your spouse. A surviving spouse can receive the higher of their own benefit or their late spouse's benefit. This makes the higher earner's choice very important. Delaying can provide the highest benefit for the surviving spouse for life.
Divorced people who were married for at least 10 years may also qualify. They can collect based on their former spouse's record. This does not affect the former spouse's benefit.
Working While Collecting Social Security
If you claim before full retirement age and keep working, your benefit may be cut if your earnings go above certain limits. In 2025, the earnings limit is $22,320 per year. For every $2 you earn above that, $1 is withheld. After you reach full retirement age, the withheld amounts are added back. There is no longer an earnings test.
The Bottom Line
Social Security is one piece of the puzzle. It is not the whole picture. Arizona's tax treatment makes it a great state for retirees. But getting the most from your benefits means lining up your other income sources, knowing the tax rules, and picking the right claiming age for your situation.