Social Security benefits can go a long way in retirement, especially if your savings are falling short.
As of 2021, the median retirement account balance among workers was just $35,345, according to Vanguard's most recent How America Saves report. For many older adults, then, outside sources of income like Social Security are critical.
However, there's a chance you may not receive as much as you think in benefits. While major factors like taxes and claiming too early can reduce your monthly payments, there are two other sneaky ways you may be missing out on your hard-earned benefits.
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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 your birth year, but it's age 67 for anyone born in 1960 or later.
How much you'll actually receive from Social Security each month depends on when you begin claiming. If you file as early as possible at age 62, you'll receive as little as 70% of your full benefit amount. By waiting until age 70, you'll receive 100% of your benefit plus at least 24% extra each month.
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However, only 13% of U.S. adults can correctly name their FRA based on their birth year, according to a 2022 report from the Nationwide Retirement Institute, and the average baby boomer guessed that their FRA was 63 years old.
While this may seem like an innocent mistake, if you don't know your correct FRA, you risk inadvertently claiming benefits too early.
For example, say you believe your FRA is 63 years old when it's actually age 67. If you file at 63, you may expect to receive your full benefit amount when in reality, you're claiming four years early -- which would permanently reduce your benefits by a whopping 25% per month.
2. Not taking advantage of all the benefits you're entitled to
Retirement benefits are the most popular type of Social Security, and most workers are entitled to these payments after working and paying taxes for at least 10 years. But they're not the only benefits you might qualify for in retirement.
If you're married, divorced, or widowed, you could be eligible to receive spousal, divorce, or survivors benefits, respectively.
- Spousal benefits: You may qualify for spousal benefits if you're currently married to someone who is entitled to either retirement or disability Social Security benefits.
- Divorce benefits: If you're divorced and your previous marriage lasted for at least 10 years, you might be entitled to divorce benefits. You cannot currently be married to qualify for these benefits, but if your ex-spouse has remarried, it won't affect your ability to claim divorce benefits on their record.
- Survivors benefits: If you were financially dependent on a loved one who passed away, you could collect survivors benefits based on their work record. These are generally reserved for widows and widowers, but they're also sometimes available for divorced spouses, parents, children, and other family members.
For both spousal and divorce benefits, the maximum you can receive is 50% of the amount your spouse or ex-spouse is entitled to collect at their FRA. If you're already receiving more than that amount based on your own work record, you won't qualify for spousal or divorce benefits.
Survivors benefits are a bit trickier, as your benefit amount will depend on your age, your relation to the deceased, and how many other family members are claiming benefits. But if you're widowed, you could collect the deceased person's entire benefit amount in survivors benefits.
Social Security benefits can potentially make or break retirement for many seniors, so it's wise to ensure you're collecting as much as possible. By knowing your FRA (and how your claiming strategy will affect your benefit amount) as well as what types of benefits you qualify for, you can maximize your monthly payments.
