15 Things to Know Before Claiming Social Security

When should you claim Social Security?

The answer to this question is a lot more complicated than you think. That's because it's crucial you know a few basic facts about how the benefits program works before you make this choice.

In particular, here are 15 questions you need to be able to answer to ensure you know enough to move forward with filing for Social Security benefits to begin.

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Your full retirement age (FRA) matters a lot when it comes to your Social Security claim. That's because you need to file for benefits to begin at this exact age if you want to receive your standard benefit.

FRA depends on birth year. Here's when yours is, depending upon when you were born:

• 66 and 2 months if you were born in 1955
• 66 and 4 months if you were born in 1956
• 66 and 6 months if you were born in 1957
• 66 and 8 months if you were born in 1958
• 66 and 10 months if you were born in 1959
• 67 if you were born in 1960 or later

ALSO READ: Full Retirement Age for Getting Social Security

So, you receive your standard benefit if you claim Social Security at full retirement age. But, what if you claim at a different age?

You can start checks as early as 62. But, if you file for benefits before FRA, a monthly early filing penalty applies. It reduces the amount of your benefit checks permanently.

If you begin getting benefits at 62 when your full retirement age is 67, you'd face a 30% reduction in benefits. If you start at 63, you'd lose 25% of your standard benefit.

The benefits reduction adds up to a 6.7% annual cut for each of the first three years and an additional 5% cut for each year prior that you claim benefits before FRA.

You also have the option to wait until after FRA. If you do, you can earn delayed retirement credits monthly that increase your benefit. They add up to an 8% annual increase.

Your standard Social Security benefit is based on average wages over your 35 highest-earning years (after wages are adjusted for inflation).

Earning more money for a larger number of years increases your benefit by raising your average wage. But low-earning years or working for less than 35 years reduces it, thus lowering your benefit.

If you haven't worked for 35 years or if you're earning more now and don't want earlier, low-earning years included in your average, you may wish to work for longer before retiring.

If you claim Social Security early and then regret it, it's sometimes possible to undo your decision.

You can rescind your claim if it's been less than a year since you filed for benefits, and you can repay all the income Social Security has provided to date.

But if it's been more than a year or you can't repay the benefits, you may be stuck with your filing choice and the permanent impact it caused to your benefits.

If you're married, you need to consider how your Social Security claiming choice could affect your spouse.

If you're the higher earner and you claim benefits early, this shrinks survivor benefits. Survivor benefits that widows or widowers receive can equal the higher of the two benefits either spouse was getting. An early claim and a reduced benefit could thus leave your surviving spouse with less.

On the other hand, if your husband or wife wants to get spousal benefits on your work history, they can't do that unless you've claimed your benefits first.

Be sure to consider these issues when deciding if it's a good time to file for Social Security.

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Retirement benefits aren't the only Social Security benefits available.

You could get spousal or survivor benefits based on a spouse's work record, and these may be worth more than your own benefit if your spouse was a higher earner.

These benefits can be available even after divorce as long as your marriage lasted at least 10 years. So, be sure you know the rules for eligibility.

ALSO READ: 3 Weird Social Security Rules Every Married Person Should Know

Social Security benefits may not be worth as much as you think, and you should make sure you're realistic about what they'll do for you before you claim them.

Benefits are generally designed to replace around 40% of pre-retirement income. That's not enough to live on. You can check the specific amount of your future benefits by signing into your mySocialSecurity account.

Most experts recommend replacing around 80% of pre-retirement income when you leave the workforce. However, there's a chance you'll need more money than that.

Aim to get an idea of what your spending will look like as a retiree and see how much additional income you'll need on top of Social Security to ensure your costs are covered.

It's crucial to ensure you have enough other income to combine with Social Security to cover the necessities. So, review all the income sources that will be available to you besides your retirement benefits.

For most people, supplemental income comes from a 401(k) or IRA. Be sure you've chosen a safe withdrawal rate and that the extra cash coming from these sources will be sufficient for a secure retirement.

If not, you may need to work longer, save more, or delay claiming Social Security to try to increase your benefit amount.

ALSO READ: 5 Signs You're Really Ready to Retire

Medicare Part B premiums are typically withdrawn from Social Security checks. They reduce the monthly income your retirement benefits provide.

Understanding the impact of Medicare premiums helps you make an informed choice about how far your benefits will go.

You should also be prepared for not just Medicare premiums but also out-of-pocket costs you may incur for receiving health services. Do this before claiming benefits to ensure you don't end up with too little money after paying for healthcare you need.

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Social Security retirees receive periodic cost-of-living adjustments (COLAs) when a consumer price index shows that year-over-year expenditures are rising.

It's important to know that COLAs are based on a percentage of current benefits. In 2022, for example, retirees will get a 5.9% raise.

That means if you make the choice to shrink Social Security by claiming benefits early, all your future raises will be smaller.

Although COLAs are meant to help ensure seniors don't lose buying power, they don't do that perfectly.

The consumer price index that was chosen to assess cost increases is based on the spending habits of urban wage earners and clerical workers. But they spend differently than seniors.

The result is that COLAs haven't accurately kept pace with inflation, and benefits have lost buying power over time. This is unlikely to change, so you need to be prepared for the fact the real value of your benefits is likely to fall over time.

ALSO READ: Social Security Benefits Have Lost 30% of Their Value in the Past Two Decades. Here's Why

If you plan to work while getting benefits and you haven't yet reached full retirement age, it's possible you could end up forfeiting some of your Social Security checks.

That's because you lose a portion of your benefits once your income exceeds a certain threshold. Be sure you know what the earning limits are, as you may not want to start getting your checks if you'll just end up missing out on most of them due to your paycheck.

The good news is, the benefits you forfeit aren't lost forever. Your check amount is recalculated at full retirement age to account for the money you missed.

If you live in one of 13 states that taxes Social Security, it's possible you'll owe some state taxes on your benefits.

You could also owe federal taxes if your provisional income exceeds $25,000 as a single filer or $32,000 as a married joint filer. Provisional income is half of Social Security, all taxable income, and some nontaxable income.

If you'll be taxed on your benefits, you need to know that since this will reduce the amount of take-home income they offer.

ALSO READ: Retirees in These 13 States Risk Losing Some of Their Social Security Checks

Social Security's trust fund is scheduled to run dry in 2034 and automatic benefit cuts of 22% could occur if that happens.

Lawmakers will probably act to prevent it, but changes to the law could also reduce benefits by doing things such as raising full retirement age or making COLAs less generous.

It's important to know that changes could be on the horizon so you may not be able to count on getting the exact benefit you expect. Be sure you have saved enough to support yourself even with lower Social Security checks than anticipated.

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You don't want to end up with less benefits than you expect -- or less income than you need -- as a retiree. So, before you consider filing for Social Security benefits, be sure you carefully research the answers to each of these 15 questions.

By doing so, you can make certain you have the information you need to make the choice that's right for you in your later years.

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