Social Security benefits are an integral source of income for many older Americans, and you have more control over your benefit amount than you might think.
There are several factors that affect the amount you receive each month, and the decisions you make could have a significant impact on your income. However, only 6% of adults can name all four factors that determine your benefit amount, according to a 2021 survey from the Nationwide Retirement Institute.
If you’re in the dark about how, exactly, your benefits are calculated, you’re not alone. But knowing these four factors can help you maximize your Social Security.
1. Your work history
Your income throughout your career is the primary factor that influences your benefit amount. The Social Security Administration takes an average of your income over the 35 highest-earning years of your career, then adjusts it for inflation.
If you haven’t worked a full 35 years before you begin claiming, you’ll have zeros added to your average, which will reduce your benefit amount. In addition, if you’re able to increase your income even slightly, that could result in higher payments each month.
2. Your age
The year you were born will affect your benefit amount because it determines your full retirement age (FRA). This is the age at which you’ll receive the full benefit amount you’re entitled to based on your work history.
If you were born in 1960 or later, your FRA is 67 years old. If you were born before 1960, your FRA will be either 66 or 66 and a certain number of months, depending on the exact year you were born.
3. The age you begin claiming benefits
You don’t necessarily have to wait until your FRA to begin claiming benefits, but if you claim before or after that age, it will affect your monthly payments.
The earliest you can begin claiming is age 62, but by filing that early, your benefit amount will be reduced by up to 30%. You could also delay benefits past your FRA, and by doing so, you’ll receive your full benefit amount plus a bonus of up to 32% if you wait until age 70 to file.
Deciding what age you want to begin claiming is one of the most important Social Security decisions you’ll make, because your benefit amount is generally locked in for life once you file (save for annual cost-of-living adjustments).
4. Your marital status
If you’re married or divorced, you could receive extra from Social Security each month depending on how much your spouse or ex-spouse is receiving.
You could be entitled to spousal benefits if your spouse is earning significantly more than you from Social Security. The maximum you can receive is 50% of the amount your spouse will receive at his or her FRA.
If you’re already receiving more than that based on your own work history, you’re not eligible for spousal benefits. If you’re collecting less than that amount (or if you haven’t worked long enough to be eligible for Social Security at all), you’ll receive the higher of the two amounts.
To qualify for divorce benefits, you must have been married for at least 10 years, and you cannot currently be married. As with spousal benefits, the most you can receive is 50% of the amount your ex-spouse is entitled to at his or her FRA.
Making the most of Social Security
While Social Security benefits may seem like something that’s out of your hands, you do have a lot of control over how much you receive. When you know all the factors that influence your monthly payments, it will be easier to make the best decisions to maximize your monthly income.
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