Social Security explained
Social Security benefits explained: Many Americans feel they have a general grasp of how Social Security work, you pay into the system during your career, and in retirement you receive monthly checks for life. Many even know that higher lifetime earnings usually translate to larger benefits. But beyond that, some of the program’s rules remain surprisingly misunderstood.
Those gaps in understanding can cost retirees money, sometimes for decades. Here are three key Social Security facts that often go unnoticed but could meaningfully change the benefit you ultimately receive, as per a report.
But if you have fewer than 35 years of work, the missing years are filled with zero-income years that drag down your benefit. Because most people earn more later in their careers, continuing to work can replace earlier low-earning years and increase your future checks.
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Claiming benefits before FRA reduces your checks by as much as 30%, depending on how early you file, and delaying benefits past FRA increases your monthly payment until age 70, when your benefit stops growing, as per Motley Fool.
Delaying isn’t always the best financial choice for everyone. People with limited savings might not be able to wait, while those with shorter life expectancies could receive more total money by claiming earlier. Choosing the right time depends on your financial situation and health.
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With possible benefit cuts less than a decade away, having additional income sources is increasingly important, as per The Motley Fool. These may include:
Yes, but doing so can reduce your monthly check by up to 30%.
How is my monthly benefit amount determined?
It’s based on your primary insurance amount (PIA), which comes from your earnings record.
Those gaps in understanding can cost retirees money, sometimes for decades. Here are three key Social Security facts that often go unnoticed but could meaningfully change the benefit you ultimately receive, as per a report.
Your 35 Highest-Earning Years Are What Really Count For Social Security Benefits
An important aspect of the Social Security formula is your average indexed monthly earnings (AIME), which is the average of your 35 highest-earning years, adjusted for inflation. So that means, you don’t need 35 years of work to qualify for benefits, earning 40 credits is enough, as per Motley Fool report. In 2025, one credit requires $1,810 in earnings, rising to $1,890 in 2026 and you can earn up to four credits each year.But if you have fewer than 35 years of work, the missing years are filled with zero-income years that drag down your benefit. Because most people earn more later in their careers, continuing to work can replace earlier low-earning years and increase your future checks.
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Claiming Age Can Increase or Reduce Your Monthly Social Security Benefit
Your earnings record determines your primary insurance amount (PIA), which is what you receive at full retirement age (FRA). For anyone born in 1960 or later, that age is 67.Claiming benefits before FRA reduces your checks by as much as 30%, depending on how early you file, and delaying benefits past FRA increases your monthly payment until age 70, when your benefit stops growing, as per Motley Fool.
Delaying isn’t always the best financial choice for everyone. People with limited savings might not be able to wait, while those with shorter life expectancies could receive more total money by claiming earlier. Choosing the right time depends on your financial situation and health.
ALSO READ: New IRS IRA limits drop — see how rich you would be if you saved this much annually
Social Security Was Never Designed to Cover All Retirement Costs
While many retirees rely heavily on their monthly checks, Social Security was designed to replace only about 40% of the average worker’s pre-retirement income. Some people receive slightly more or less, but it was never intended to serve as a full income source.With possible benefit cuts less than a decade away, having additional income sources is increasingly important, as per The Motley Fool. These may include:
- Retirement savings in an IRA or 401(k)
- Health savings account (HSA) funds, which can be used for non-medical expenses after age 65 without penalty (but still taxed)
- Part-time work for an added paycheck and social connection
- Governent assistance programs available through state social services agencies
FAQs
Can I claim Social Security benefits before 67?Yes, but doing so can reduce your monthly check by up to 30%.
How is my monthly benefit amount determined?
It’s based on your primary insurance amount (PIA), which comes from your earnings record.
