4 Social Security Facts to Know Now, Even If Retirement Is Years Away

If you’re a long way away from retirement, Social Security probably isn’t something you think about often. After all, you have current financial issues to worry about, and a confusing government retirement benefits program in your future is probably not on your radar. The reality, though, is that there are things you need to know about Social Security now so you can create the right financial plan. Here are four crucial facts everyone needs to be aware of so they’re not left with serious money concerns in their later years.

1. Benefits only replace a small percentage of income

The first and most important thing you need to know is that Social Security benefits aren’t meant to be your sole source of retirement income. If you’re counting on them to cover the bulk of your costs, you’re going to be disappointed — and broke. Your retirement benefits are intended to replace about 40% of pre-retirement income, which is half (or less) than the 80% to 90% that experts recommend you replace. That’s by design because Social Security is supposed to be one of three sources of retirement support, which include savings and a pension. If you’re like most young people and a pension isn’t something you’re likely to be offered, your savings is going to have to replace the income you’ll need that Social Security doesn’t cover. So it’s important to start investing for your future ASAP so you’ll have a nest egg to provide that financial support.

2. Working less than 35 years will shrink your benefits

You’re going to need to work for at least 35 years to avoid a reduced Social Security benefit. While you can qualify for retirement checks after as little as 10 years of work, the Social Security benefits formula counts your 35 highest-earning years in calculating your average earnings. If you don’t have a 35-year earnings history, some years of $0 wages will become part of your average wage and reduce your benefits. As you plan your career, consider what kind of jobs you’ll be able and willing to do for the long term to get at least 35 years under your belt before retiring.

3. You’ll have to wait until 67 to get your full benefit

Understanding when you can claim Social Security is also very important for future retirees. You’re allowed to start getting benefits when you’re as young as 62 but will have a designated full retirement age (FRA) that’s later than that. Anyone born in 1960 or later has a full retirement age of 67, so that’s the age when most future retirees can get their standard Social Security check. If you claim early, you’ll shrink the amount you’ll receive as a result of early-filing penalties. Those penalties will reduce your payment by 6.7% annually for the first three years and an additional 5% for any prior year you claim early. If you don’t want to shrink your Social Security amount, you’ll have to wait until 67 to start bringing home retirement checks. Even at that point, you may want to wait until age 70 so you can earn delayed retirement credits that will increase the income your benefits offer. If you don’t think you’ll remain in the workforce until at least age 67, it’s a good idea to aim to have enough savings to support you for a while. This way, can put off your Social Security benefits claim and not take a financial hit due to an early claim.

4. The more you earn through your career, the higher your benefit will be

Finally, benefits are based on average wages, so the more you earn during your career, the bigger your checks will be. Always look for opportunities to boost your salary, like negotiating for a higher paycheck when you’re first hired or during performance reviews. Doing so will not only help you now, but also can give you more Social Security later. By understanding these four key facts, you can make plans to work, save, and set yourself up for a secure future with the Social Security check you deserve.