Millions of seniors rely on Social Security for some or even all of their income in retirement, so it's wise to ensure you're making the most of your benefits. To maximize your monthly checks, though, you'll first need to know which factors determine your benefit amount. Social Security can be complex and confusing at times, so if you're unsure how your payments are calculated, you're not alone.
In fact, only 8% of U.S. adults can name all four factors that determine how much they'll receive in benefits, according to a 2023 survey from the Nationwide Retirement Institute. Here's everything you need to know about all four of these factors.
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1. Your age
Your birth year will determine your full retirement age (FRA), which is the age at which you'll receive the full benefit amount you're entitled to, based on your work history.
If you were born in 1960 or later, your FRA is 67 years old. Those born before 1960 have an FRA of either 66 or 66 and a certain number of months, depending on the exact birth year.
Again, your FRA will determine how long you'll need to wait to receive your full benefit amount. When you're deciding the age at which you want to start taking Social Security, then, your FRA is one of the most important factors to consider.
2. The age at which you begin claiming
At your FRA, you'll receive your full benefit amount -- but you don't have to wait until that age to begin claiming. You can file for Social Security as early as age 62, but doing so will result in a benefit reduction of up to 30%.
You can also wait until after your FRA to claim, which will earn you a boost in benefits. If you have an FRA of 67 years old and you delay benefits until age 70, you'll receive your full benefit amount plus 24% extra each month.
Once you begin claiming, your benefit amount is generally locked in for life (save for annual cost-of-living adjustments). So before you start taking Social Security, it's important to know how your claiming age will affect your monthly payments.
3. Your work history
The Social Security Administration calculates your benefit amount by taking an average of your wages throughout the 35 highest-earning years of your career. That number is then run through a complex formula to account for cost-of-living changes, and the result is the amount you'll receive at your FRA.
If you haven't worked 35 full years before you begin claiming, you'll have zeros added to your earnings average -- which will bring down your benefit amount.
By working longer than 35 years, you could increase your benefit amount. Chances are you're earning more now than you were 35 years ago. Because only your highest-earning years are included in your average, continuing to work now while you're earning more can result in a larger benefit amount.
4. Your marital status
If you're married or divorced, you could be entitled to extra money each month in the form of spousal or divorce benefits.
Spousal benefits are generally available to those married to someone who's entitled to Social Security retirement or disability benefits. The maximum amount you can receive is 50% of what your spouse qualifies for at their FRA.
To qualify for divorce benefits, you can't currently be married, and your previous marriage must have lasted for at least 10 years. Like with spousal benefits, the most you can collect is 50% of your ex-spouse's FRA benefit amount.
If you're already entitled to benefits based on your own earnings, you can still collect spousal or divorce benefits -- but only the higher of the two amounts. For example, if you're receiving $800 per month based on your own work history and your spouse is entitled to $2,000 per month, your total benefit amount would be $1,000 per month.
Social Security can go a long way in retirement, so it pays to have an idea of how your benefits are calculated. When you know what factors determine your benefit amount, you can ensure you're doing everything possible to maximize your monthly retirement income.
