Social Security benefits can potentially make or break retirement for many older Americans, so it's wise to have a strategy to ensure you're receiving as much as possible. There are several factors that can affect the size of your monthly payments, many of which you can control. While everyone's situation is different, there are a few reasons you may not receive as much as you're expecting each month.
1. You're claiming early
One of the biggest factors affecting your benefit amount is the age at which you file for Social Security. The only way to collect the full benefit amount you're entitled to, based on your work record, is to wait until your full retirement age (FRA) to begin claiming.
Your exact FRA will depend on the year in which you were born, but everyone's will fall somewhere between ages 66 and 67. If you file before that age (as early as 62 years old), your benefit amount will be reduced by up to 30%.
Filing early isn't necessarily a bad move and can be a smart strategy in some cases. However, it will result in smaller checks each month, so it's important to make this decision carefully before you begin claiming.
2. Your benefits won't increase at your FRA
One common misconception about Social Security is that if you claim early, your benefit amount will go up once you reach FRA.
In fact, only 55% of Americans correctly answered this question in a 2021 survey by the Nationwide Retirement Institute, meaning nearly half of survey participants may be heading into retirement expecting their benefit amount to increase later in life.
In reality, your smaller checks are permanent if you claim early. Again, this doesn't necessarily mean you shouldn't claim before your FRA, but if you're claiming early under the assumption that you'll earn a boost in benefits later, you might end up receiving less than you expect.
3. You haven't worked long enough
In general, you'll need to have worked for at least 10 years to become eligible for Social Security retirement benefits. However, to receive as much as possible, you'll need to work for a full 35 years before you begin claiming.
To calculate your benefit amount, the Social Security Administration takes an average of your wages over your 35 highest-earning years. That amount is then adjusted for cost-of-living changes, and the result is the amount you'll receive if you claim at your FRA.
If you haven't worked a full 35 years, you'll have zeros included in your average to account for the time you weren't working. That will bring down your average earnings, which will also result in a lower benefit amount.
Social Security benefits are an integral source of income for many retirees, so it pays to have a plan in place to maximize them. By understanding the factors that affect your benefit amount, it will be easier to avoid any Social Security surprises in retirement.