Social Security can become a very important source of income later in life. it can’t be yours only A source of income since you will need funds from your retirement plan to supplement it. Still, once your paycheck stops, your benefits will almost certainly help pay your bills as a senior.
Unfortunately, while many retirees rely on Social Security, many Americans don’t even understand one of the most basic rules of how benefit programs work. Worse, it’s not just Americans who don’t understand. most of them are Wrong A rule that could cost them thousands of dollars over their lifetime.
This is a Social Security rule that most people get wrong, so you can see if you’re making a fundamental mistake when it comes to retirement benefits, too.
Image source: Getty Images.
The basic Social Security rule where most people get it wrong has to do with the full retirement age (FRA). This is the age you must be to qualify for standard unreduced benefits. Chances are, you’re wrong about your age.
This is because a new survey from Allianz Life Insurance Company of North America shows that 55% of Americans believe that the full retirement age for Social Security is 65. This is simply no It is, and it hasn’t been that way for a long time.
In fact, FRA varies depending on your year of birth. Here are the full retirement ages based on your age at birth:
If you assume, like most people do, that your FRA is 65, you could end up with a significant reduction in your benefits because of this mistaken belief.
So why are Americans so confused about what FRA stands for Social Security? The reality is, it’s easy to make this retirement planning mistake because FRA Was 65 when the Social Security benefit program was first created. Later, the policy was gradually transferred due to the reforms that had to be carried out due to the shortage of social security funds in the 1980s.
Because many people are less familiar with the legal changes of the 1980s and the subsequent phase-in of the FRA, many future retirees simply do not realize that 65 is no longer the critical age. Of course, it doesn’t help that Medicare eligibility still starts at age 65. It’s natural to think that once you qualify for Medicare, you will also qualify for full Social Security benefits.
The problem is, this misunderstanding has consequences. Each month you file for Social Security before FRA will result in a reduction in benefits. You’re eligible to start receiving checks at age 62, so if you think your FRA is 65, you may underestimate how much claiming early will reduce your payments.
oryou might wait until age 65 to claim benefits, not even realizing you’ll be subject to a two-year early filing penalty and reduce your benefits by approximately 13.3%. This is a big problem because Social Security benefits are inflation-protected and guaranteed to continue for life—unknowingly scaling back benefits could reduce this important source of income.
It’s important that you don’t make this mistake and end up accidentally having to rely on your 401(k) or other investments more than you planned because you’ve reduced your Social Security payments for life. Understand what your actual FRA at birth is based on and make a fully informed claim choice based on this correct information.
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But there are some lesser-known ones “Social Security Secrets” Can help ensure increased retirement income.
One simple trick can earn you up to $123,760 more…each year! Once you learn how to maximize your Social Security benefits, we think you’ll be able to retire with the peace of mind we all strive for. join in stock advisor Learn more about these strategies.
View “Social Security Secrets” »
The Motley Fool has a disclosure policy.
You May Be Wrong About This Basic Social Security Rule Originally Posted by The Motley Fool
