Don't Let Your Social Security Benefits Be Less Than You Expected

Social Security provides a surprisingly large chunk of most retirees' income. Indeed, most elderly beneficiaries get 50% or more of their income from it, while 23% of married ones and 43% of unmarried ones get fully 90% or more of their income from it, according to the Social Security Administration.

Thus, it's best not to let yourself operate under any misunderstandings about Social Security, as the more you know about it, the more likely you are to get the most out of it. Here are some common misunderstandings.

Your Social Security benefits might be less than you expected

It's best to take a little time to get an official estimate of how much we can expect from our future Social Security benefits -- because many of us are overestimating what we'll get, and that can wreak havoc on our retirement if we haven't saved enough to make up the difference in needed income. About 25% of recent retirees report that their benefits are less than they expected, according to a 2017 Nationwide Retirement Institute survey.

The Social Security program was designed to replace about 40% of pre-retirement earnings for those with average earnings. Those who had above-average earnings in their working years can expect a lower replacement rate, and vice versa. You can get a sense of how much to expect from Social Security via the Social Security Administration's online Retirement Estimator tool, and you can get an even clearer idea of your expected benefits by setting up a my Social Security account with the SSA.

Here's a little clue, though: The average monthly Social Security retirement benefit was recently $1,404, or close to $17,000 per year. If your earnings have been above average, you'll collect more than that -- but relatively few people collect more than $30,000, so don't expect Social Security to provide as much as you'd like.

You may start collecting Social Security earlier than you planned to

The Nationwide Retirement Institute also found that future retirees expected to start collecting Social Security benefits around the age of 65, on average. Most (51%) didn't plan to start collecting early. That may sound reasonable, and indeed, the "full retirement age" at which retirees can start collecting their full benefits (as opposed to reduced ones) is 66 or 67 for most of us. So 65 is technically early, and will result in somewhat reduced benefits.

Despite those plans, though, the most common age at which retirees start collecting Social Security is actually 62 -- the earliest age at which they can do so. Why would that be? Well, of course many people aim to retire early and do so. But many others have early retirement thrust upon them. Fully 48% of retirees left the workplace sooner than they had planned to, according to the 2017 Retirement Confidence Survey -- with 41% of them doing so because of health problems or disability, 26% citing company downsizings or closures, and 14% having to care for a spouse or other family member.

Maximize your Social Security benefits

The information above can be discouraging, especially if you were expecting to get, say, $45,000 annually from Social Security. Take heart, though, because 16% of the retirees surveyed reported that they're receiving more than they had expected to in benefits. And a sizable 59% are getting pretty much what they expected.

Better still, there are a bunch of ways to maximize your Social Security benefits, such as starting to collect them later. (For every year beyond your full retirement age that you delay, up to age 70, your benefit checks will swell by about 8%.) You might also employ a spousal strategy, if you're married, such as having the partner with the lower earnings history start collecting earlier, while the higher-earner delays as long as possible, to max out his or her check. An upside of that strategy is that when one spouse dies, the other can collect the larger of the two checks for the rest of their life.

The more you know about Social Security, the more you can probably wring out of it. Be sure to have an idea of what to expect and to factor Social Security benefits into your retirement planning.

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