Most people are probably aware of how Social Security works, given that it’s a huge source of retirement income for many seniors. However, new research has shown that Americans are sorely in need of information on one crucial aspect of Social Security. And if you’re unaware of anything, you might wind up putting yourself through years of financial turmoil.
Get all the right information
There are several aspects that influence your Social Security payment in retirement. These are just a few of them:
- Your pay history
- How long you’ve been employed
- The age at which you submit an application for benefits
Your Social Security payments are based on your earnings during your 35 best-paid years working. Then, after that, your filing age will dictate how much money you receive on a monthly basis.
You’ll receive your entire monthly pension if you wait until FRA to file. However, if you apply for benefits before FRA (you can join as early as age 62), you will lose part of your monthly payment for the rest of your life.
In fact, if you have an FRA of 67 but you decide to proceed with a Social Security application at age 62, you’ll lose 30% of your benefits. Once your work career ends and you no longer receive a salary, this might put you in financial difficulty.
According to that logic, you’d think American citizens would have a decent concept of what their FRA is. However, according to a recent poll by the Nationwide Retirement Institute, only 13% of US adults are aware of their correct FRA. This is a significant issue because you can’t make an educated decision about when to enroll for benefits if you don’t know your correct FRA.
What is your anticipated full retirement age?
Your birthday determines when you qualify for FRA benefits. However, the system is not global.
When you claim Social Security before FRA, your monthly payment will be lower for the rest of your life. Delaying benefits beyond FRA, on the other hand, will result in a bigger monthly payment through retirement.
Of course, you can’t wait indefinitely in exchange for a bigger benefit. When you reach age 70, your benefit will not be enhanced any longer. However, if you don’t have a lot of retirement savings to fall back on, it may make sense to file for Social Security at FRA or later.
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