Social Security benefits can make or break retirement for many older Americans, so it’s prudent to develop a strategy to maximize your benefits. Numerous factors, many of which you can control, can affect the size of your monthly payments. While each individual’s situation is unique, there are a few reasons you may not receive as much money as you anticipate each month.
1. YOU HAVE MADE AN EARLY CLAIM
The age at which you file for Social Security is a significant factor in determining your benefit amount. To collect the full benefit amount to which you are entitled based on your work history, you must wait until you reach full retirement age (FRA).
Your exact FRA will vary depending on the year of your birth, but it will fall between 66 and 67 for everyone. If you file for benefits prior to that age (as early as age 62), your benefit amount will be reduced by up to 30%.
Early filing is not always a bad idea and can be a prudent strategy in some instances. However, this will result in smaller monthly checks, so it’s critical to consider this carefully before you begin claiming.
2. AT YOUR FRA, YOUR BENEFITS WILL NOT INCREASE
One widespread misconception about Social Security is that filing early increases your benefit amount once you reach FRA.
Indeed, only 55% of Americans correctly answered this question in a 2021 survey conducted by the Nationwide Retirement Institute, implying that nearly half of survey respondents may enter retirement anticipating an increase in their benefit amount later in life.
In reality, if you claim early, your smaller checks are permanent. Again, this does not mean you should not file a claim prior to your FRA, but if you file early in the hope of receiving a benefit boost later, you may end up receiving less than you expect.
3. YOU HAVEN’T WORKED FOR LONG ENOUGH PERIODS OF TIME
To qualify for Social Security retirement benefits, you must have worked for at least ten years. To receive the maximum benefit, however, you must work for a full 35 years prior to filing.
The Social Security Administration determines your benefit amount by averaging your wages over your 35 highest-earning years. This amount is then adjusted for changes in the cost of living, and the result is the amount you will receive if you file a claim at your FRA.
If you did not work for the full 35 years, your average will include zeros to account for the time you were not working. This reduces your average earnings, which results in a reduced benefit amount.
For many retirees, Social Security benefits are a critical source of income, so it pays to have a strategy in place to maximize them. By being aware of the factors affecting your benefit amount, it will be easier to avoid unpleasant Social Security surprises during retirement.