Will you end up counting on Social Security to pay the bills in retirement? Chances are, those monthly benefits will constitute a significant chunk of your senior income, so it's important to know how Social Security works. Here are a few key rules to commit to memory.

1. Your benefits will be slashed if you file before full retirement age

The amount you collect in Social Security each month will be calculated based on how much you earned during your 35 highest-paid years of wages, after indexing for inflation. The age at which you claim those benefits, however, will impact that number as well. If you file at full retirement age, or FRA, you'll get the precise monthly benefit your earnings history entitles you to.

Older couple sitting at table, holding cups in hand


FRA isn't the same set number for everyone; rather, it's a function of your year of birth. You can consult the following table to see what your FRA looks like:

If You Were Born In:

Your Full Retirement Age Is:




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

1960 or later



That said, you don't have to wait until FRA to file for Social Security. You're allowed to claim your benefits once you turn 62, but filing before FRA will result in a reduction in benefits, the extent of which will depend on how early you file.

Specifically, you'll lose 6.67% of your benefits per year for the first 36 months you file ahead of FRA, and then 5% of your benefits for each year you file early after that. That formula might seem confusing, but all it means is that if you file for Social Security three years before FRA, you'll lose 20% of your benefits. File five years early, and you'll lose 30%.

Also note that in most cases, that reduction will remain in effect for the rest of your life. The only exception is if you manage to withdraw your benefits application and repay all of the money you collected in benefits within a year of having filed.

2. Your retirement benefits will increase if you file after full retirement age

Just as your retirement benefits will be reduced if you file for Social Security before FRA, so too do you get the option to grow those benefits by claiming them after FRA. For each year you hold off past that point, you'll accrue delayed retirement credits that boost your benefits by 8% a year. That increase will then remain in effect for the rest of your life.

3. There's no sense in delaying benefits past age 70

Holding off on filing for benefits past FRA is a good way to increase your Social Security payments. But once you reach age 70, there's no point in delaying benefits any longer. The credits you get to accrue by waiting to file stop accumulating at age 70, regardless of your FRA, so if you don't claim benefits by the time you turn 70, you risk losing out on Social Security income.

Now one thing you should know is that if you forget to file by age 70, you may not be completely out of luck. Social Security will pay up to six months of retroactive benefits so that if you remember to file by 70-1/2, you won't lose out on income. Still, it's a good idea to mark your calendar with a reminder to claim benefits by your 70th birthday -- especially since at that point, you'll have waited long enough to file.

The more you educate yourself on Social Security, the better those benefits will serve you down the line. If you're nearing retirement with little money in savings, it's especially crucial that you understand how the program works so that you're able to make the most of it.