If I Could Tell All Retirees 1 Thing About Social Security, I'd Say to Do This Before You Claim Benefits

Source The Motley Fool

For many older adults, Social Security can make or break retirement. According to a 2024 Gallup poll, a staggering 83% of workers expect to rely on their benefits to some degree in retirement, with more than one-third of that group saying Social Security will be a "major" source of income.

It's wise, then, to make sure you're maximizing your monthly payments. While many factors will influence your benefit amount, there's one aspect of Social Security that the vast majority of older adults misunderstand: full retirement age.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

Social Security card with hundred dollar bills.

Image source: Getty Images.

Most older adults get this one simple question incorrect

Can you name your true full retirement age? If not, you're in good company -- neither can 85% of U.S. adults, according to a 2024 survey from the Nationwide Retirement Institute.

Your full retirement age (FRA) is the age at which you'll receive 100% of the benefit you've earned due to your income and work history. This figure will depend on your birth year, but it's between ages 66 and 67 for everyone. Those born in 1960 or later have an FRA of 67.

Social Security full retirement age chart.

Image source: The Motley Fool.

However, the average baby boomer believes their FRA is 64 years old, according to the Nationwide survey. The average guess from survey participants across all age groups was 61 years old -- even though the earliest you can begin claiming Social Security is age 62.

Not knowing your FRA could seriously hurt your finances

Incorrectly guessing your FRA may seem like a small issue. However, it could throw a major wrench in your retirement plans.

For example, say your real FRA is 67 years old, but you mistakenly believe it's age 64. Three years is not necessarily a lot of time, but every month you file before your FRA will reduce your checks. In this case, filing three years early will slash your payments by 20% per month.

The average retiree collects around $1,925 per month from Social Security as of November 2024. So, if you collect $1,900 per month at your FRA but file at 64 expecting to receive this amount, it could come as a shock when you only receive $1,520 per month after the 20% cut. For those relying heavily on their benefits, that $380 monthly reduction can sting.

Keep in mind, too, that these reductions are permanent. If you file before your FRA, you'll receive smaller checks every single month for the rest of your life. That makes it even more important to know your true FRA because even a small misjudgment could cost you for decades to come.

What's the best age to take Social Security?

Knowing your FRA is perhaps the single most important factor to know before you begin claiming. Not only will it help you plan your finances more accurately, but it can also make it easier to decide at what age you want to take Social Security.

You don't necessarily need to wait until your FRA to file for benefits; in some cases, you could be better off filing early. If your primary goal is to retire early, for instance, sometimes the monthly reduction you'll face by claiming before your FRA is a worthwhile trade-off for the opportunity to spend more time in retirement.

On the other hand, waiting a few years to take Social Security can help maximize your monthly income. If you have an FRA of 67, delaying up to age 70 will earn you a bonus of 24% on top of your full benefit. This could boost your monthly income by hundreds of dollars, which could go a long way if your savings are falling short.

There's no single correct time to start Social Security, as it will depend on your personal situation. But before you make any decisions, it's crucial to know your FRA and how your age will affect your benefit amount.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Gold holds steady below $4,150 amid elevated US yields Gold price (XAU/USD) trades on a flat note near $4,140 during the early Asian session on Tuesday. Pressure from a stronger US Dollar (USD) and elevated US Treasury yields was offset by reduced expectations of a Federal Reserve (Fed) rate hike this month.
Author  FXStreet
Oct 06, Tue
Gold price (XAU/USD) trades on a flat note near $4,140 during the early Asian session on Tuesday. Pressure from a stronger US Dollar (USD) and elevated US Treasury yields was offset by reduced expectations of a Federal Reserve (Fed) rate hike this month.
placeholder
【Daily Brief】Gold rebounds 1% off a two-month low, Nasdaq drops 1.25% and yields ease — the storm premium keeps WTI near $91Gold trades at $4,174 after rebounding from Wednesday's $4,090 two-month low, the Nasdaq fell 1.25% while the Dow edged higher, and the 10-year Treasury eased to 5.23% from the week's highs. Hurricane Isaias keeps about 25% of Gulf output shut in with WTI near $91, and bitcoin holds below $82,000. The next scheduled tests are the EIA report on 15 October and the FOMC on 27-28 October.
Author  Irene Q.
Yesterday 06: 28
Gold trades at $4,174 after rebounding from Wednesday's $4,090 two-month low, the Nasdaq fell 1.25% while the Dow edged higher, and the 10-year Treasury eased to 5.23% from the week's highs. Hurricane Isaias keeps about 25% of Gulf output shut in with WTI near $91, and bitcoin holds below $82,000. The next scheduled tests are the EIA report on 15 October and the FOMC on 27-28 October.
placeholder
Hurricane Isaias has shut in a quarter of Gulf oil output — can WTI clear $92 before Thursday's EIA report?WTI trades at $90.80 after rebounding roughly 3% from Wednesday's $87.96 low as Hurricane Isaias — the Atlantic season's first — forces producers to shut in about 25% of US Gulf of Mexico output. Brent holds at $103.41. The first official read on the disruption arrives with the EIA weekly petroleum report on Thursday 15 October — here are the key levels and both scenarios.
Author  Irene Q.
Yesterday 06: 38
WTI trades at $90.80 after rebounding roughly 3% from Wednesday's $87.96 low as Hurricane Isaias — the Atlantic season's first — forces producers to shut in about 25% of US Gulf of Mexico output. Brent holds at $103.41. The first official read on the disruption arrives with the EIA weekly petroleum report on Thursday 15 October — here are the key levels and both scenarios.
placeholder
US September CPI preview: inflation set to hit 3.7% — will the Fed hike in December?US September CPI lands Wednesday with headline inflation seen at 3.7% y/y and core at 0.2% m/m. December hike odds sit near 70% — here are the scenarios, the calendar and the key levels.
Author  Irene Q.
4 hours ago
US September CPI lands Wednesday with headline inflation seen at 3.7% y/y and core at 0.2% m/m. December hike odds sit near 70% — here are the scenarios, the calendar and the key levels.
placeholder
Gold posts first weekly gain in three weeks — can $4,200 hold through CPI?Spot gold closed at $4,194.645, up 1.47% — its first weekly gain in three weeks — and COMEX futures settled back above $4,200 at $4,220.30. Here are the drivers, the levels and the scenarios into Wednesday's CPI.
Author  Irene Q.
2 hours ago
Spot gold closed at $4,194.645, up 1.47% — its first weekly gain in three weeks — and COMEX futures settled back above $4,200 at $4,220.30. Here are the drivers, the levels and the scenarios into Wednesday's CPI.
goTop
quote