When you think about the things you enjoy doing in your spare time, reading up on Social Security probably isn’t one of them. But the reality is that it’s important to understand how the program works — even if that means sinking hours into reading up on different rules.
If you don’t have the time to dive in right now, we’ve got you covered. Here are four of the most important Social Security rules to keep on your radar, whether you’re retiring in the near term or in many years.
1. Benefits are based on personal earnings
It’s a myth that Social Security pays everyone the same benefit every month. Rather, benefits are based on personal earnings — specifically, your wages during your 35 most-profitable years in the labor force. If, during your 35 highest-paid years on the job, you earn an average annual salary of $80,000, you’re apt to be eligible for a higher monthly benefit than someone with an average salary of $40,000.
That’s why it pays to do whatever you can to boost your income while you’re working. That could mean developing new skills to set yourself up for promotions and raises.
2. Filing early could shrink your benefits for life
You’re entitled to your full monthly Social Security benefit based on your wage history upon reaching full retirement age, or FRA. That age hinges on your year of birth and falls out at 66, 67, or somewhere in between.
Meanwhile, you’re able to sign up for Social Security once you turn 62. But for each month you claim benefits ahead of FRA, they’ll be slashed — and on a permanent basis. If you’re entitled to a monthly benefit of $1,500 at an FRA of 67, filing at 62 will leave you with just $1,050 a month, instead.
3. You’ll get rewarded financially for delaying your filing
While claiming Social Security early will cause your benefits to shrink, postponing your filing past FRA will have the opposite effect. Your benefits will increase for each month you hold off, up until you turn 70.
If you have an FRA of 67 and wait until 70 to file, you’ll snag a 24% boost to your benefits. Going back to our example, that would turn a $1,500 monthly benefit into $1,860 — for life.
4. You can claim benefits even if you never worked
Though Social Security benefits are earnings-based, and you need to fulfill certain earnings requirements to qualify for them, it is possible to collect benefits in retirement even if you never held down a job. If you’re married to someone who’s entitled to Social Security or divorced from someone who’s eligible, you may be able to claim spousal benefits.
Your spousal benefit won’t be the same as what your current or former spouse receives. Rather, you’ll be entitled to up to 50% of that benefit. But still, that’s better than not getting benefits at all.
The more you learn about Social Security, the easier it’ll be to strategize about ways to snag higher benefits. Take some time to read up on the program. You’ll be thankful you did once you retire.
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