Social Security benefits can make up a sizable portion of income for many older adults, so it pays to ensure you're making the most of them. While everyone's retirement strategy will be slightly different, there are a few ways you could be missing out on Social Security. These three mistakes are more common than you might think and could potentially be costly.
1. Not knowing your full retirement age
Your full retirement age (FRA) is the age at which you'll receive the full benefit amount you're entitled to, based on your work history. Your exact FRA will depend on the year in which you were born, but everyone's will fall between ages 66 and 67.
If you're unsure of your FRA, you're not alone. In fact, only 13% of U.S. adults could correctly name their FRA in a 2022 survey from the Nationwide Retirement Institute.
Knowing your FRA is critical, however, because it can affect your decision of when to claim. Say, for example, you file at age 65, expecting to collect your full benefit amount. In reality, though, you're claiming early by filling at that age, which means you'll receive a reduced benefit amount.
2. Claiming too early
You can begin claiming benefits as early as age 62, but if you file before your FRA, your monthly payments will be reduced by up to 30%. This reduction is permanent, too, so if you claim early, you'll receive smaller checks for the rest of your life.
Claiming early isn't always a bad thing, and in some cases, it could be the best move for your situation. But it's not the right option for everyone. If your savings are falling short and you expect to depend heavily on Social Security in retirement, claiming early could make it tougher to cover all of your expenses.
For example, the average retiree collects roughly $1,670 per month in benefits. Say you have an FRA of 67 years old and you'd receive $1,670 by filing at that age. If you were to file at 62, your benefits would be reduced by 30%, leaving you with around $1,169 per month -- a difference of around $500 per month.
3. Waiting too long to file
In general, the longer you wait to begin claiming Social Security, the more you'll receive. However, once you pass age 70, waiting to file won't result in any additional benefits.
In other words, for every month you delay past age 70, you'll be missing out on benefits you're entitled to. If you wait even a year or two beyond age 70 to file, you could potentially miss out on tens of thousands of dollars in benefits.
There's nothing wrong with continuing to work late in life. However, it's best to start taking Social Security at age 70 whether you're ready or not to avoid forfeiting any of your benefits.
Social Security benefits are a lifeline for millions of retirees, and the right strategy can help you maximize them. By knowing your FRA and claiming at the right age for your situation, you can head into retirement as prepared as possible.