This Social Security move could cost you almost $ 500 a month in benefits
For many older Americans, Social Security benefits can make or break retirement. According to the Social Security Administration, about half of married retirees depend on their benefits for at least 50% of their income. And for almost a quarter of couples, their monthly checks represent at least 90% of their retirement income.
Social security benefits were not designed to be a primary source of income in retirement. But few workers are entitled to pensions, and it is becoming increasingly difficult to save. For these reasons, many retirees have no choice but to rely on social security.
If you expect your monthly checks to represent a substantial portion of your retirement income, it is wise to make sure that you maximize your benefit amount. And there’s a Social Security move that could cost you hundreds of dollars a month.
How your age affects your benefit amount
The amount of your benefits is calculated based on your salary throughout your career. The more money you earn and the longer you work, the more benefits you are entitled to.
However, to receive this full benefit amount, you will have to wait until Full Retirement Age (FRA) to start claiming. For anyone born in 1960 or later, your FRA is 67 years. People born before 1960 have an FRA of 66 or 66 and a few months, depending on the exact year of your birth.
You can start claiming benefits before your FRA, but your benefit amount will be reduced for each month you apply early. If you apply as early as possible at age 62, your benefit amount will be reduced by up to 30%.
Depending on how much you are entitled to receive from your FRA, a claim at age 62 could result in hundreds of dollars less per month.
For example, the average pension benefit amount in 2021 is $ 1,543 per month, according to the Social Security Administration. Suppose you have a 67-year-old FRA and, by applying at that age, you would receive $ 1,543 per month. If you apply at age 62, your benefit amount will be reduced by 30%, leaving you about $ 1,080 per month, or $ 463 less per month than you would have received by waiting until age 67 for request.
What age must be declared?
In theory, it doesn’t matter what age you claim. Social Security benefits are designed so that you are likely to receive roughly the same amount regardless of when you apply. If you make an early claim, you will receive smaller but more checks throughout your life. If you delay benefits, each check will be more important, but you will not receive as many.
However, life doesn’t always go so smoothly. If you end up living a shorter than average lifespan, you might receive more money over the course of your life if you claim Social Security early. On the other hand, if you live longer than the average, you could earn more by delaying benefits.
Another factor to consider is the amount of your savings. Those with a strong retirement fund can afford to apply for benefits sooner. But if you expect Social Security to be your main source of income, it may make more sense to wait to claim so that you can receive more per month.
Finally, the age you claim will depend on your retirement priorities. If your top priority is to spend as much time as possible in retirement, you may decide to retire and apply for benefits earlier. You will receive less money each month, but it can be a worthwhile compromise for you. Or, if your primary concern is being financially secure in retirement, deferring benefits can be a smart move.
Ultimately, the age at which you start claiming Social Security is up to you, and there is no right or wrong answer. Think about your lifestyle, your financial situation, and your personal preferences. By making this decision carefully, you can be sure that you are preparing for the best possible retirement.