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Social Security can be confusing, but understanding how the program works will help you maximize your monthly payouts. While you don’t have to know everything about the program, there’s one crucial factor that almost half of Americans overlook â€” and it might result in a lower-than-expected benefit.
What effect will your age have on your benefits?
The age at which you file for Social Security substantially impacts the amount you receive. To get the full amount based on your work record, you must wait until you reach your full retirement age (FRA), which is either 66, 67, or anywhere in between, depending on the year you were born. You can file for benefits as early as age 62, but you’ll get lower monthly amounts.
However, many Americans fall into the trap of not realizing that this benefit cut is permanent. According to a 2021 Nationwide Retirement Institute poll, over 45% of respondents wrongly assume that if they file early, their benefits will increase after they reach their FRA.
In reality, if you file for Social Security early, your lower payments are usually fixed for life. In other words, you’ll keep receiving reduced monthly payments even after you hit FRA.
So, should you claim early or wait?
As a result, making an informed decision about when to claim benefits is vital.
Claiming Social Security early may be the best option for some people, but remember that the benefit cut is permanent. If you file with the expectation that your payments will be increased later, it could jeopardize your retirement.
When it comes to when to claim, there’s no right or wrong answer. Generally, though, deferring Social Security may be the best option if your funds are running low and you want to earn as much money as possible each month. Waiting until 70 to file may result in hundreds of extra dollars every month, which can go a long way in retirement.
On the other hand, claiming Social Security earlier may be a wise choice if you have a solid nest egg and are ready to forego some monthly income for the opportunity to retire early. Similarly, if you have reason to suspect you won’t live a longer-than-average life, filing your claim early may allow you more time to make the most of your benefits.
Maximizing your Social Security payments
Before you decide when to file your claim, run the figures to determine how much you would gain or lose each month.
You may check your statements online by creating a mySocialSecurity account. That’ll provide you with an estimate of your benefit amount based on your actual earnings and the amount you’ll get if you claim at your FRA.
If you claim at 62, your benefit amount will be lowered by up to 30% if you have an FRA of 67. If you wait until 70, you may be able to get your full benefit amount plus up to 24% more each month (again, assuming your FRA is 67).
It’s easy to decide when to file after understanding how your age affects your benefit amount. And the more deliberate your decision, the better off you’ll be in retirement.
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected]