You probably already understand some aspects of Social Security, even if you're a long way from claiming it. You know you pay into the program throughout your career, and then you get monthly checks in retirement that last the rest of your life. You probably also understand that earning a higher income during your career leads to a larger retirement benefit.
However, the finer points of the program may be a bit unclear to you. That's pretty common, but it also means you're missing valuable knowledge that could help you maximize your Social Security benefits and enjoy a more comfortable retirement, like the three facts listed below.
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1. Your benefit calculation only considers your 35 highest-earning years
The first step in the Social Security benefit formula is calculating your average indexed monthly earnings (AIME). This is your average monthly earnings over your 35 highest-earning years, adjusted for inflation. Of course, not everyone has a 35-year work history.
You can still qualify for benefits as long as you've earned 40 credits, where one credit is defined as $1,810 in earnings in 2025 and $1,890 in earnings in 2026. You can earn a maximum of four credits per year. However, if you have worked fewer than 35 years, you'll have zero-income years that drag down your benefit.
Having a longer work history is usually to your advantage. Most people earn more as their careers progress, meaning their more recent, higher-earning years slowly edge out their earlier, lower-earning years in their benefit calculation.
2. When you apply for benefits dictates how much you receive
The Social Security Administration uses your AIME to calculate your primary insurance amount (PIA). This is the full benefit you're entitled to, based on your work history and the benefits formula that was in place in the year you turn 62, regardless of whether you sign up at that time.
If you want to receive your PIA, you must wait until your full retirement age (FRA) to apply for checks. This varies by birth year. Yours is 67 if you were born in 1960 or later. Older adults have slightly younger FRAs.
You're free to claim Social Security under your FRA, but doing so reduces your monthly benefit by up to 30%. Your checks gradually grow every month you delay your application until you reach 70. This is when you qualify for your largest monthly benefit.
It's easy to assume from this that delaying Social Security is the best move if you want the most money possible, and that's true for many people. However, you must consider your own life expectancy and financial situation to determine what's right for you. Those with little personal savings may not be able to afford to delay while those with short life expectancies can come out ahead by applying early.
3. Social Security was never intended to be your sole source of retirement income
Many seniors today rely heavily on Social Security, but the government never intended it to be anyone's sole source of retirement income. It was supposed to replace only about 40% of pre-retirement income for the average worker. High earners may get a little more while low earners may receive a little less.
This, coupled with the fact that Social Security is less than a decade away from possible benefit cuts, underscores the importance of having other sources of income to supplement your checks. Examples include:
- Personal retirement savings: This is your best fallback if you can manage it. Money you stash in a 401(k) or IRA is yours to use for whatever expenses you have.
- Health savings account (HSA) funds: Once you turn 65, you can use HSA funds for non-medical expenses without the 20% tax penalty. However, you will still owe income taxes on these withdrawals. Alternatively, you could use your HSA funds for medical withdrawals only to keep them tax-free.
- A job: Working in retirement gives you access to a steady paycheck. It can also provide an opportunity to socialize with others.
- Government benefits: Your state social services agency may be able to connect you with federal, state, and local government programs that can help you cover your basic living costs.
You'll likely need a combination of these income sources to cover your costs. Figure out which ones make the most sense for you and be prepared to pivot if your financial situation or lifestyle changes.
