Social Security will become an important part of your retirement income someday. But do you actually know how benefits are calculated, or which type of benefits are available to you? It’s a complex system, so it’s normal to feel overwhelmed… But at the very least, everyone should know these three facts about their Social Security benefits.
Your benefits are calculated based upon your work history. Social Security will calculate your benefit amount, utilizing a formula that averages your 35 highest-earning years of work.
If you work less than 35 years, some zeros averaged into that formula will bring down your benefit amount.
On the other hand, if you work longer than 35 years, you will likely add higher earnings into your work history.
Your benefits are also based upon the age at which you file your claim. Benefits are calculated assuming that you will retire at your Full Retirement Age, which is assigned by Social Security according to your date of birth. Currently, FRAs range between 65 to 67 years old.
However, you can retire as early as age 62, if you’re willing to accept a lower benefit. Or, you can wait beyond your FRA and file your claim later, and earn a larger benefit check. Benefit amounts stop increasing at age 70, though, so there is generally no reason to wait beyond that age.
Other types of benefits are available. As we mentioned above, Social Security benefits are calculated based upon your work history. But there is an exception to this rule; if your spouse’s work history provides them with a much larger check, you might be better off claiming the spousal benefit instead of your own benefit.
For those who are divorced or widowed, the spousal benefit also applies if you were married at least ten years.
Certain other rules apply, so don’t make any assumptions about the benefits that will be eligible to you. Let’s discuss Social Security at your next appointment, so that you can appropriately include this payment into your overall retirement plan.
Asset Protection Group is not affiliated with or endorsed by the Social Security Administration or any government agency.