Social Security benefits are a significant pillar of retirement planning for many Americans. With the median retirement account balance standing at a mere $35,345 in 2021, it’s evident that many retirees lean heavily on Social Security. However, there are subtle ways you might be missing out on maximizing these benefits. Let’s delve into two key areas where individuals often leave money on the table.
Understanding Your Full Retirement Age (FRA)
Your Full Retirement Age, or FRA, is pivotal in determining how much you’ll receive from Social Security. It’s the age at which you’re eligible for 100% of your calculated benefits based on your earnings history. For those born in 1960 or later, the FRA is 67.
The amount you receive from Social Security hinges on when you decide to start claiming. Start at 62, and you’ll get only 70% of your full benefit. But if you delay until 70, you’ll receive your full benefit plus an additional 24% monthly.
Surprisingly, a 2022 study revealed that only 13% of U.S. adults could accurately identify their FRA. Misunderstanding this can lead to premature claims, resulting in permanently reduced benefits. For instance, if you mistakenly believe your FRA is 63 when it’s 67 and claim at 63, you’d inadvertently reduce your benefits by 25% monthly.
Leveraging All Eligible Social Security Benefits
While retirement benefits are the most recognized, they aren’t the only Social Security benefits available. Depending on your marital status and life events, you might be entitled to:
- Spousal Benefits: If they are eligible for retirement or disability benefits, you might qualify for up to 50% of your spouse’s total retirement amount.
- Divorce Benefits: Divorced individuals whose marriage lasted a decade or more might be eligible for divorce benefits. Your current marital status matters, but your ex-spouse’s doesn’t.
- Survivors Benefits: These benefits are for those who were financially reliant on someone who has passed away. While typically for widows and widowers, they can sometimes extend to other family members. The amount varies based on several factors, but a widow could potentially receive the total benefit amount of the deceased.
It’s essential to understand that you will only qualify for spousal or divorce benefits if your retirement benefit is half of your spouse’s. On the other hand, survivors’ benefits are more complex and depend on various factors.
Maximizing Your Social Security Payout
Social Security benefits can significantly influence the quality of retirement for many. You can optimize your monthly payouts by comprehending your FRA and the types of help you’re eligible for. It’s all about informed decisions to ensure a comfortable retirement.