Social Security benefits can potentially make or break retirement for many older Americans, so it’s wise to have a strategy in place to ensure you’re receiving as much as possible. There are several factors that can affect the amount of your monthly payments, many of which you can control. While everyone’s situation is different, there are a few reasons you may not get as much as you expect each month.
1. You are claiming early
One of the biggest factors affecting your benefit amount is the age at which you apply for Social Security. The only way to collect the full benefit amount to which you are entitled, based on your work history, is to wait until your full retirement age (FRA) to start claiming.
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Your exact FRA will depend on the year you were born, but everyone’s will fall between the ages of 66 and 67. If you apply before that age (62 and older), your benefit amount will be reduced by up to 30%
Filing early isn’t necessarily a bad decision and can be a smart strategy in some cases. However, it will result in smaller checks each month, so it’s important to make this decision carefully before you start claiming.
2. Your benefits will not increase on your FRA
A common misconception about Social Security is that if you file early, your benefit amount will increase once you reach the FRA.
In fact, only 55% of Americans answered this question correctly in a 2021 survey by the National Retirement Institute, meaning nearly half of survey participants may be on their way to retirement expecting the amount of your benefits increase later in life.
Actually, your smaller checks are permanent if you claim them early. Again, this doesn’t necessarily mean you shouldn’t claim your FRA early, but if you’re claiming early under the assumption that you’ll get an increase in benefits later, you could end up receiving less than you expected.
3. You haven’t worked hard enough
In general, you must have worked for at least 10 years to be eligible for Social Security retirement benefits. However, to receive the highest amount possible, you will need to work for a full 35 years before you start claiming.
To calculate your benefit amount, the Social Security Administration takes an average of your wages over your highest earning 35 years. That amount is then adjusted for cost-of-living changes, and the result is the amount you’ll receive if you claim on your FRA.
If you haven’t worked a full 35 years, you’ll have zeros included in your average to account for the time you weren’t working. That will lower your average earnings, which will also result in a lower benefit amount.
Social Security benefits are an integral source of income for many retirees, so it pays to have a plan to maximize them. By understanding the factors that affect your benefit amount, it will be easier to avoid Social Security surprises in retirement.
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