Social Security is the cornerstone of many Americans’ retirement budgets.
About half of all U.S. households with a member 65 or older receive at least 50% of their household income from the program, according to data compiled by the Social Security Administration.
As such, the budgets and lifestyles of a huge number of Americans depend heavily on how large a benefit they get each month.
Unfortunately, there are pitfalls that could result in a disappointing amount of benefits if you don’t understand the most important rules.
Here are three ways you could miss out on some of the Social Security benefits you’re entitled to.
Most people become eligible to claim Social Security retirement benefits when they turn 62, but claiming as soon as possible could end up costing you in the long run.
For those Americans who aren’t retired yet, the government defines “full retirement age” as 66 to 67 years old, depending on your birth year.
And when the Social Security Administration calculates what it considers your “full” benefit, it is based on the premise that you’ll start collecting benefits at that age.
If you claim before your full retirement age, your monthly benefit gets reduced relative to what it would have been if you waited. Someone with a full retirement age of 67 (anyone born in 1960 or later) will receive just 70% of their full benefit if they claim at 62.
On the other side of the coin, every month you delay claiming Social Security past your full retirement age earns you a slightly higher benefit (until it maxes out at 70).
The table below details what percentage of your retirement benefit you’ll receive relative to your benefit at full retirement age (for those born in 1960 or later).
| Age When Claiming | Percentage of Full Retirement Benefit |
|---|---|
| 62 | 70% |
| 63 | 75% |
| 64 | 80% |
| 65 | 86.67% |
| 66 | 93.33% |
| 67 | 100% |
| 68 | 108% |
| 69 | 116% |
| 70 or older | 124% |
Data source: Social Security Administration.
While you will receive more monthly checks over your lifetime if you claim early, that’s not necessarily the optimal strategy in the long run.
A 2019 study from United Income found just 8% of retirees would maximize their retirement income by claiming before 65. The optimal age to claim Social Security for the average retiree is actually 70.
