Social Security helps millions of seniors pay the bills and enjoy retirement to the fullest. If you expect to count on those benefits, you'll need to be strategic in claiming them. Here are a few key things you ought to know that will help you make the most of Social Security, whether you're filing this year or in the future.
1. Commit your full retirement age to memory
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This is the age at which you're entitled to collect your full monthly benefit without a reduction. Although benefits are based on your earnings history — specifically, your 35 highest years of earnings — the age at which you file for them could cause that number to go up or down. If you file ahead of full retirement age, your benefits will be reduced for each month you claim them early, which is why it often pays to sit tight and wait until you can collect your benefits in full.
Here's what full retirement age looks like, depending on your year of birth:
Year of Birth
Full Retirement Age
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
If you were born in 1953, you'll hit full retirement age at some point this year. But if you were born anytime after that, waiting to file for Social Security will help you avoid a reduction in your benefits.
2. Know what the average benefit looks like
Though your Social Security benefits will be based on your specific earnings record, it might help you to know that the average recipient this year collects $1,461 a month, or $17,532 a year. That's not a whole lot of income by itself, and if you file ahead of full retirement age, you'll reduce that sum to a smaller amount. Keep in mind that Social Security isn't designed to sustain seniors in the absence of other income, so if you're low on independent savings, you definitely can't afford a reduction. If you want to know what your specific benefits will look like, you can create an account on the Social Security Administration's website and get an estimate.
3. Report mistakes on your earnings record
The Social Security Administration keeps track of your earnings for the purpose of calculating your retirement benefits, so if your personal record contains an error that works against you, your benefits could take a hit. Imagine, for example, that you earned $52,000 in 2017, only the SSA doesn't have any income on file for you that year. It's an odd thing to have happen, but it is possible. If you don't correct that error, you could lose out on income in retirement. Therefore, make a point of checking your earnings statements every year. You can access them by creating an account on the Social Security Administration's website if you don't receive them in the mail (which you won't if you're under 60).
4. Be aware of the earnings test limits
If you're working and collecting Social Security simultaneously but haven't yet reached full retirement age, you're subject to what's known as the earnings test. This year, you can earn up to $17,640 before having benefits withheld, but once your income surpasses that point, you'll lose $1 in Social Security for every $2 in earnings. If you'll be reaching full retirement age at any point this year, you can earn up to $46,920 without having benefits withheld. From there, you'll lose $1 in Social Security for every $3 in earnings.
Keep in mind that the benefits you have withheld under the earnings test aren't lost permanently; they'll be added back into your monthly payments once you reach full retirement age. However, the reduction you face in your monthly benefits by filing before full retirement age will be permanent unless you manage to undo your application within a year and repay every cent you collected to the Social Security Administration.
5. Know that delaying benefits pays off
Waiting until full retirement age to claim your benefits will help you avoid a reduction in Social Security income. An even better bet, however, might be to delay benefits past full retirement age. For each year that you do up until age 70, you'll boost your benefits by 8%. That increase will then remain in effect for the rest of your life, so if you're entering retirement without much in personal savings, scoring a larger monthly benefit is a good way to compensate.
The smarter you are about Social Security, the more you stand to gain from it. Keep these tips in mind, whether you're filing for benefits this year or are planning to do so well into the future.
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