If You Don’t Know These Three Things, You Aren’t Prepared to File for Social Security.


Seniors can choose when to begin receiving Social Security benefits.

Unfortunately, deciding when to start receiving benefits can be more difficult than most people realize. As a result, older Americans sometimes make poor decisions because they lack all necessary information.

You don’t want a bad decision about Social Security benefits to jeopardize your financial security in your later years. You can avoid this fate by not claiming them until you have three key facts.

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1. How your age affects your earnings

It may come as a surprise, but the age at which you begin receiving benefits has an impact on both your monthly and lifetime income. You must understand how and why so that you can make informed decisions before beginning your Social Security benefits.

Retirees are entitled to a “primary insurance amount” (PIA) based on their earnings under the rules for the benefits formula. However, they will only receive that amount if they claim benefits at the Full Retirement Age (FRA).

Those who do not claim at FRA will have their PIA adjusted upwards if they wait to claim benefits afterward, with their benefit increasing for each month they delay until they reach the age of 70. Those who claim before the age of 62 will have their benefits reduced for each month they claim early.

Make sure you know when your FRA is (it’s based on your birth year) and how much your benefit will shrink or increase if you don’t claim right at FRA. You can use your mySocialSecurity account to figure this out because you can see your projected benefits at various ages.

If you’re thinking about delaying past the age of 62, figure out how long it will take you to make up for lost benefits by calculating how much income you’ll miss out on and how many months you’ll have to earn a higher payment to cover that amount.

By following these steps, you can determine whether filing an early, late, or on-time claim is the best option for maximizing lifetime benefits while also providing you with a comfortable monthly income.

2. How long you’ve been working and why it matters

You’ll also need to know how many years of work you’ve done in total. This is significant in determining your benefits amount.

Your PIA is calculated using your average wages over the last 35 years. And, regardless of how many years your career history actually spans, 35 years is always the time period used to determine your average wage.

If you have worked for more than 35 years, you may have a higher average wage and thus a higher benefit. This is because some of your lower-earning years will be spread out and will not affect your average. However, if you have less than 35 years, including years with no wages in your benefits calculation will result in a lower Social Security income.

If you don’t know how long you’ve worked, you can check your mySocialSecurity account for a record of your average earnings. If you’re earning significantly more than you were previously, you may decide to work for a longer period of time in order to replace some low-earning years with high-earning ones.


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3. The amount of income that your benefits will replace

Finally, it is critical to have a realistic understanding of what your Social Security income will provide for you.

These benefits are designed to replace approximately 40% of pre-retirement earnings. When you realize how little that is, you must ensure that you have enough extra income to support yourself. If you don’t, you’ll want to work and save for a longer period of time before retiring and claiming benefits so you don’t end up struggling financially in your later years.

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