Nearly Half of Americans Are Falling Into This Social Security Trap

Social Security can be a complicated topic, but knowing at least the basics about how the program works can make it easier to maximize your monthly payments. While you don’t need to know everything about the program, there’s one important aspect of Social Security that trips up nearly half of Americans — and it could result in a lower-than-expected benefit amount.

How will your age affect your benefits?

The age at which you begin claiming Social Security will have a significant impact on the amount you receive. To receive the full amount you’re entitled to based on your work record, you’ll need to wait to claim until your full retirement age (FRA) — which is either age 66, 67, or somewhere in between, depending on the year in which you were born. You can file for benefits as early as age 62, but doing so will result in smaller payments each month.

The trap that many Americans fall into, however, is not realizing that this benefit reduction is permanent. In fact, around 45% of people incorrectly believe that if they file early, their benefits will increase once they reach their FRA, according to a 2021 survey from the Nationwide Retirement Institute.

In reality, if you claim Social Security early, your smaller payments are generally locked in for life. In other words, even after you reach FRA, you’ll continue receiving reduced checks each month.

Should you claim early or delay?

For this reason, it’s especially important to ensure you’re choosing wisely when deciding at what age to file for benefits.

Claiming Social Security early can be the right move for some people, but make sure you realize that the benefit reduction is permanent. If you’re filing under the assumption that your payments will be increased later, it could spell trouble for your retirement.

There’s not necessarily a right or wrong answer as to when you should claim. In general, though, if your savings are falling short and you want to earn as much as possible each month, delaying Social Security could be the right move. Waiting until age 70 to file could result in collecting hundreds of dollars more each month, which can go a long way in retirement.

On the other hand, if you have a healthy nest egg and are willing to sacrifice some monthly income for the chance to retire earlier, claiming Social Security sooner could be a smart move. Similarly, if you have reason to believe you may not have a longer-than-average life span, claiming early could give you more time to make the most of your benefits.

Maximizing your Social Security benefits

Before you make your decision about when to claim, it’s wise to run the numbers to see just how much you’d be gaining or losing each month.

If you haven’t already, you can create a mySocialSecurity account to check your statements online. This will give you an estimate of your benefit amount based on your real earnings, and it’s also the amount you’ll receive if you file at your FRA.

By claiming at age 62, your benefit amount will be reduced by up to 30% if you have an FRA of 67 years old. If you wait until age 70, you could receive your full benefit amount plus up to 24% extra each month (again, assuming your FRA is 67).

Once you know exactly how your age will impact your benefit amount, it’s easier to decide when to claim. And the more thought you put into your decision, the better off you’ll be in retirement.

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