This Little-Known Social Security Rule Will Dictate the Size of Your Benefit

You want to get the largest Social Security benefit you can, but the benefit formula can seem confusing if you don't have a finance background. Fortunately, you don't need to understand it in order to make smart choices about your checks.

There are only a few key things you need to know. First, the more you pay in Social Security benefit taxes throughout your career, the larger your future retirement benefit will likely be. Second, your full retirement age (FRA) and your relation to it when you apply have a huge effect on your monthly checks. Here's a brief overview of FRA and how you can leverage it to grow your benefits.

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What FRA is and why you need to understand it

The Social Security Administration assigns everyone a FRA, which is when they qualify for the full benefit they've earned based on their work history. Your FRA depends on your birth year. You can find it in the table below:

Data source: Social Security Administration.

You don't have to apply for checks at your FRA. Many people don't. In these cases, the Social Security Administration adjusts your benefit up or down accordingly.

Early claimers get more checks, but each one is smaller. Specifically, you lose:

• 5/9 of 1% per month for up to 36 months of early claiming, then
• 5/12 of 1% per month for any additional months of early claiming

For someone with a FRA of 67, claiming as soon as they become eligible at 62 shrinks their checks by 30%.

Delaying Social Security beyond your FRA increases your monthly benefit. You gain 2/3 of 1% per month, or 8% per year, until you qualify for your maximum benefit at 70.

How knowing your FRA can help you grow your Social Security benefit

Knowing your FRA and where you are in relation to it when it's time to claim can give you a better idea of what to expect from your checks. It can also help you avoid mistakes that could shrink your benefit, like signing up right away at 62 when you don't need the money.

Delaying Social Security until your FRA or even age 70 could give you your largest lifetime benefit. But this might not be the case for you if you have a short life expectancy. And it might not be feasible if you lack other retirement income sources to help you cover your costs until you're ready to apply for benefits.

When to apply is ultimately up to you. But if you need a little help deciding, you can create a my Social Security account. There's a benefit estimator tool here that can show you how your claiming age will affect the benefit you're eligible for, no math required.