For millions of older Americans, Social Security benefits are an indispensable aspect of retirement. In fact, 64% of retirees say their benefits are a major source of income, according to a report from the Society of Actuaries.
Because Social Security benefits have the ability to make or break your retirement, it's vital to ensure you're making the most of them. Social Security can be a complex topic, but the more you understand about how the program works, the better the decisions you can make to maximize your monthly checks. And as you're nearing retirement age, there are three things in particular you need to know.

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1. How much of your income will be replaced by Social Security benefits
When you're planning for your senior years, it's important to think about how much of your retirement income will come from your savings versus other sources like a pension or Social Security benefits. However, 57% of baby boomers say they don't know how much of their income will be replaced by Social Security in retirement, according to a recent survey from Nationwide.
If you're not sure how much you'll be receiving in benefits, it's tough to determine how much you'll have to save in your retirement fund. Fortunately, it's easier than you may think to estimate your future benefits.
To get an idea of how much you can expect to receive from Social Security, you can check your statements online by creating a mySocialSecurity account. Your statements use your real earnings to calculate your future benefit amount, giving you an idea of how much you'll be able to depend on your benefits in retirement.
2. How the age you claim will affect your benefit amount
Your earnings history determines how much you're eligible to receive in benefits, but that assumes you'll be claiming at your full retirement age (FRA) -- which is between 66 and 67, depending on the year you were born.
If you claim before or after that age, you'll receive less or more in benefits each month. For example, if you have a FRA of 67 years old and you claim as early as possible at age 62, your benefits will be reduced by 30%. On the other hand, if you wait until age 70 to begin claiming, you'll receive your full benefit amount plus an extra 24% each month.
One common misconception is that if you claim early, these benefit reductions are only temporary. In fact, according to the Nationwide survey, nearly 70% of boomers share the (incorrect) belief that benefits will only be reduced until they reach their FRA, at which point they'll begin collecting their full benefit amount. In reality, if you claim earlier than your FRA, you'll receive smaller checks for the rest of your life. This means it's even more important to choose wisely when deciding when to claim benefits, because it will have a lifelong effect on your monthly retirement income.
3. What factors make up the maximum benefit amount you can receive
The maximum amount someone can receive in Social Security benefits is $3,790 per month, according to the Social Security Administration. There are several factors that make up how much you're eligible to collect, and only 7% of boomers can name those factors, the Nationwide survey found.
One factor, as mentioned previously, is the age you begin claiming benefits. To receive as much as possible each month you'll need to wait until age 70 to begin claiming benefits.
Other factors that affect your benefit amount include your earnings history and how long you've worked. You need to work and pay taxes for at least 10 years to be eligible for benefits, but your benefit amount is based on the 35 highest-earning years of your career. The Social Security Administration takes an average of your income during those years, adjusts it for inflation, and the result is your benefit amount. If you work fewer than 35 years, you'll have zeros included in your earnings average, thus reducing your benefit amount.
Your income during those 35 years matters, too. If you want to collect the maximum benefit amount, you'll have to have been earning Social Security's maximum taxable income -- which for 2020 is $137,700 per year. Not many people will be eligible to collect the maximum benefit amount, and that's okay. By understanding the factors that influence your benefits, you can ensure you're doing everything possible to collect as much as you can.
Making the most of your benefits
Many retirees depend on Social Security to make ends meet in retirement, so it's wise to take steps to maximize your monthly checks. When you know how much you'll be receiving as well as all the factors that affect your benefit amount, you can create a smart Social Security strategy and enjoy a more financially secure retirement.