Chances are high that you will rely on social security as a major source of income after retirement. Most Americans depend on their benefits to help get well, especially if they have saved too little and do not have a guaranteed pension from an employer.
That’s why it’s such a big problem that so many people do not know basic facts about social security – or in some cases even contain inaccurate beliefs.
These three shocking statistics on social security show how much confusion there is about key aspects of retirement benefits that can affect income for life.
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1. More than 9 out of 10 Americans are in the dark to maximize benefits
According to research by Nationwide, a huge 92% of Americans could not identify the factors that enable them to maximize their benefit amount. Unfortunately, this means that the vast majority of money can miss out on the money they need.
There are many steps you can take to maximize your retirement income, including:
- Worked for at least 35 years. Social security calculates your benefit based on the average wages in the 35 years you have earned the most. If your work history does not exceed 35 years, you can still get benefits, but it reduces the check size. Your average wage on which your benefits are based is calculated with a number of years of $ 0 wages set off.
- Coordination with your partner. If your partner is planning to claim marital benefits in your work history, you must first claim yours. Unfortunately, the benefit of survivors can diminish if you claim your benefits well in advance. You and your partner need to decide on the best plan.
- To claim benefits at the best time. The age at which you start looking determines how much you get. If you wait up to 70 to start your payments, you get the maximum monthly check, but whether it maximizes your lifetime income depends on how long you live.
2. More than three-quarters of Americans do not know this important age
As just mentioned, age plays an important role in determining the size of your Social Security checks.
Unfortunately, Nationwide found that more than 76% of Americans do not know their full retirement age (FRA). This is the age at which you are eligible to receive your full standard benefit. When you claim your benefits even one month before FRA, early submission penalties apply and it reduces your monthly income.
The graph below shows your FRA by year of birth.
|
Year of birth |
Full retirement age |
|---|---|
|
1955 |
66 and 2 months |
|
1956 |
66 and 4 months |
|
1957 |
66 and 6 months |
|
1958 |
66 and 8 months |
|
1959 |
66 and 10 months |
|
1960 or later |
67 |
Data source: Social Security Administration
It may actually pay to wait until your full retirement age to claim your benefits, because once you reach FRA, you start earning delayed retirement credits. The small monthly increases that these credits offer can increase your checks up to 8% for each year you wait, up to 70.
3. Nearly 40% of Americans believe that their benefits will increase later if they claim early
Some people who are aware of past fines can still make a big mistake with claiming social security. This is because Fidelity found it too 38% of Americans actually believe that their benefits would increase after reaching their FRA if they were to receive a reduced benefit early on.
The sad reality is that this is not true. Reducing early fines will affect your income for the rest of your life. You will never get as much monthly money as you would have expected.
Make sure that you do not claim social security without the necessary knowledge
These shocking statistics show how many Americans misunderstand fundamental facts about social security.
If you are one of them, take the time to know the truth before claiming your benefits. You do not want to find yourself with smaller checks than you expect, and this is the smartest step to protect your financial future, to fully explore your options.