3 Social Security Rules You Can’t Afford to Forget

Chances are, you'll rely on Social Security to some extent once you retire, so naturally, you want those benefits to be as generous as possible. Knowing how Social Security works will help you avoid mistakes that could reduce your benefits for life, so keep the following rules in mind as you navigate the process of signing up.

1. You'll reduce your monthly benefits by filing before full retirement age

Age 62 is currently the most popular choice for claiming Social Security, but those who go that route risk slashing their benefits for life. Your monthly benefits are calculated based on how much you earned during your 35 highest-paid years of earnings, but you're not entitled to your entire monthly benefit until you reach full retirement age, or FRA. That age is either 66, 67, or 66 and a specific number of months, depending on the year in which you were born.

Stack of Social Security cards.


For each month you claim benefits before FRA, you'll reduce them by a certain percentage. In a most extreme scenario -- an FRA of 67 and a filing at age 62 -- you'll be looking at a 30% cut in benefits. That reduction, however, will remain in effect for the rest of your life unless you manage to withdraw your benefits application and repay the money you collected in Social Security within a year. Therefore, be mindful of when you file -- the age you choose does matter.

2. You can't accrue delayed retirement credits past age 70

Though you'll lower your monthly benefits by filing for Social Security before FRA, you'll do the opposite if you hold off past FRA -- you'll accrue delayed retirement credits that boost your benefits by 8% a year up until age 70. Better yet, the higher benefit you lock in by delaying your filing will be the amount you collect for life.

But because those credits can no longer be racked up once you turn 70, there's no sense in postponing your benefits application past that point. Delaying further, in fact, only puts you at risk of losing out on money that could've otherwise been yours.

3. Working won't impact your benefits once you reach full retirement age

You may have heard that if you work and collect Social Security at the same time, you risk losing a portion of your benefits, and there's some truth to that. If you file for Social Security before FRA and collect a paycheck from work simultaneously, you'll currently have $1 in benefits withheld for every $2 you earn above $17,640. If you'll be reaching FRA at some point this year, you can earn up to $46,920 without impacting your benefits, but once your income exceeds that level, you'll have $1 in Social Security withheld for each $3 you earn.

As soon as you reach FRA, though, you can earn as much money as you want without having it impact your benefits. Therefore, if you're still working come FRA, don't be so quick to quit a job you enjoy doing and want to keep. You'll still be entitled to your full monthly Social Security benefit, even if you bring home a six-figure salary at the same time.

The more you understand the ins and outs of Social Security, the better equipped you'll be to file at the right time. Commit these key rules to memory, especially as retirement draws near. With any luck, they'll help you land on the best age to start collecting your benefits.

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