Social Security benefits can have a significant effect on your retirement, and many retirees rely on their monthly checks for a large portion of their income. It’s wise, then, to make sure you have a plan in place before you claim.
With the right strategy, you can maximize your monthly payments and head into retirement more prepared. And there are a few questions you should be able to answer before you even think about claiming Social Security.
1. What’s your full retirement age?
Your full retirement age (FRA) is the age at which you’ll receive the full benefit amount you’re entitled to based on your earnings record. If you’re unsure of your FRA, you’re not alone – only 16% of adults can name their FRA, according to a 2021 survey from the Nationwide Retirement Institute.
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If you were born in 1960 or later, your FRA is age 67. Those born before 1960 have a FRA of either 66 or 66 and a certain number of months, depending on the exact birth year.
It’s important to know this number because it will affect the amount you receive each month. By claiming before your FRA (as early as age 62), your benefits will be reduced by up to 30%. If you wait until after your FRA, though, you’ll receive your full benefit amount plus a bonus each month.
When you know your exact FRA, you can more accurately plan what age you want to claim benefits – and you’ll know how that age will affect the amount you receive each month.
2. How much are you expecting to receive each month?
Even if you have not retired yet, you can see an estimate of how much you’re expected to receive from Social Security each month. Simply create a mySocialSecurity account, then check your online statements to see an estimate of your benefits based on your real earnings.
Keep in mind that this estimate is the amount you’ll receive by filing at your FRA. If you claim before or after that age, it will affect the size of your monthly payments.
Having an estimate of your future benefit amount can make it easier to plan for retirement, because you’ll know approximately how much you can rely on Social Security. With this number in mind, you can then determine whether your personal savings will be enough to bridge the gap between what you need to pay the bills and what you’ll collect in benefits.
Do you and your spouse have a claiming strategy?
If you and your spouse are both eligible to receive Social Security, it’s a good idea to figure out when each of you will claim.
In some cases, it may make the most sense for you to claim at the same time, regardless of your ages. In other scenarios, one spouse may claim earlier while the other delays benefits by a few years. Or, to maximize your monthly income, you may both decide to delay Social Security.
There’s no right or wrong answer here, as your decision will depend on your unique situation and preferences. But by coming up with a plan before you retire, you and your spouse can ensure you’re making the most of your benefits.
Social Security benefits are an integral factor when it comes to retirement planning. While you do not need to have all the answers, the more you’re able to plan, the better off you’ll be once you retire.
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