According to Nationwide’s 2022 Social Security Consumer Survey, more than half of Americans say they know exactly how to optimize their social security benefits. Yet only 7% understand all the factors that determine the maximum benefit someone can receive. The report highlighted other knowledge gaps, too:
- Roughly 42% don’t know when they are eligible to receive their full benefits.
- Less than half (49%) lack a clear understanding of how much they will receive in future income.
- Nearly one-third (32%) incorrectly assume that social security benefits are not protected against inflation.
- Slightly over half (51%) mistakenly believe if they claim their benefits early, their benefits will go up automatically when they reach full retirement age.
Master these lessons and you could gain a leg up on retirement planning—and avoid being an unfortunate statistic in a future survey!
Lesson No. 1: Your full retirement age for social security benefits is the age at which you may first become entitled to full or unreduced retirement benefits.
Match your birth year to the full retirement ages shown below.
Lesson No. 2: Social security will only replace a portion of your preretirement income.
The rule of thumb is that you’ll need to replace 75–80% of your preretirement income. Social security will help fund part of your income needs, generally 25–40%, depending on your earning history. Your personal savings and retirement account will have to make up the difference.
Lesson No. 3: The longer you wait to start taking social security benefits, the more money you’ll receive.
The minimum age at which you can begin receiving social security benefits is 62. The math is pretty black and white: claiming earlier reduces your benefit and claiming later increases it. For each year you postpone taking your benefit (up to age 70), your monthly check will be larger. Check out the social security benefits planner for more comprehensive information, including calculators and other resources.
Lesson No. 4: Social security benefits are somewhat protected against inflation.
For 2022, the Social Security Administration (SSA) is paying out a cost-of-living adjustment (COLA) of 5.9%. In planning for your retirement income, it’s important to note that any COLA from the SSA can vary each year and is not guaranteed. COLAs are typically announced annually in October.
If you have questions about how your social security benefits fit into your retirement plan, please reach out to us. We would be happy to discuss your specific needs and help formulate a plan that works for you!