Not knowing these things about social security can reduce the benefits for life

Millions of older people nowadays collect social security, and when you are retired, you can appreciate having that income stream. But if you don't educate yourself on how the program works, you could end up reducing the benefits and potentially struggling financially as a result. Here are some important points about social security that you need to be aware of.

1. How to calculate your benefits

You can assume that everyone receives the same amount of social security benefits during retirement. Not so. Your benefits are calculated by taking your wages over the 35 highest paid years at work and adjusting them for inflation. Therefore, the more you earn, the higher your benefits will be.

  Man with a serious expression looking at the computer screen.


Furthermore, if you do not have a full 35 years of income under your belt (say you took the liberty of being a parent at home), you should know that you have $ 0 included in the distribution equation for each year you did not has income. And that, in turn, can hurt you during retirement.

All this emphasizes the importance of understanding what comes with the calculation of benefits. If you have a big gap in your work history, you can help make up for it by expanding your career. For each additional year you work, you replace $ 0 with an income that can help increase your benefits. Fighting for a boost throughout your career or increasing your skills to qualify for more money can also help you get a higher payout from Social Security.

Your Full Retirement Age

Although your Social Security benefits are calculated based on your income history, you will not be able to collect them in full until you reach full retirement age, or OFF. Your FRA depends on the year you were born, as follows:

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

1960 or later



You have the right to register benefits at the age of 62, but for each month you claim them prior to OFF, you reduce them by a certain percentage. In a most extreme scenario, which would mean submitting for Social Security at 62 with an FRA of 67, you would look at a 30% reduction. Therefore, you must commit your FRA to memory – so that you do not file prematurely and regret it after the fact.

By the way, you are also allowed to postpone the benefits beyond. For each year you do, you increase them by 8% until you reach 70 years of age and the increase will continue to apply permanently.

3. You are allowed to do

Some people file Social Security in front of FRA because they need the money or have some other urgent reason not to wait. But while doing so can reduce your benefits for life, it doesn't actually have to.

The Social Security Administration allows you to make a takeover, so to speak, during your life, so if you stop filing benefits early and regret it later, you can withdraw your application within a year, pay back all the money you have received from Social Security and filing at a later date. If the later time is OFF or beyond, you will avoid a reduction in benefits.

If there's one thing you should take away from the points above, it's this: Social Security is a complex program with many rules, but the more you educate yourself to them, the better equipped you will be to get get the most out of the program.

Source link

Back to top button