Think You're Ready for Social Security? Not if You Don't Know This

Think You're Ready for Social Security? Not if You Don't Know This

Social Security helps support tens of millions of Americans in retirement. Because of how important Social Security benefits are, you can't afford to make any mistakes about how the program works and how you can get the most out of it that you can. In particular, these must-know facts about Social Security are often misunderstood, leading to critical errors that can result in getting lower benefits than you're entitled to receive.

Most people understand that you can claim your Social Security as early as 62 or as late as 70, and when you claim can have an impact on how much money you get. Yet even though the mechanics are simple, many people don't understand them. For starters, know that your "primary insurance amount" is the monthly benefit you're entitled to receive if you claim Social Security at your full retirement age, which for those retiring now tends to be between 66 and 67. The Social Security Administration calculates your PIA based on your lifetime earnings and the year of your birth.

If you claim benefits early, then you lose a certain percentage of your PIA based on how early you claim. Up to 36 months early, you'll lose 5% of your benefits for every nine months that you're early, while shorter periods result in pro-rated decreases. If you claim more than 36 months early, then you'll lose an additional 5% for every 12 months that you're early in claiming them. That makes the maximum possible benefit reduction 35% (for those whose full retirement age is 67 and who claim at 62).

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Source: Fool.com