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6 Things You Need to Know About Social Security in Your 50s

Don’t wait to start factoring future benefits into your retirement planning

Middle aged woman using her laptop and doing paperwork
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You can’t start collecting Social Security retirement benefits until you turn 62. Financial planner Malik Lee says his clients generally wait until nearly then to pay the matter much mind.

“Most people really start planning kind of hard 12 to 24 months out from when they’re planning to retire. And then one of the checkboxes is, what do I do with my benefits?” says Lee, founder and managing principal of Felton & Peel Wealth Management in Atlanta.

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Even then, “a lot of people are just looking at their Social Security statement and that’s it,” he says. “If someone is looking to retire, I think the ideal time [to start planning] is about 10 years out.”

Understanding what Social Security has in store for you — how your benefit is determined, and how your age, job and family status can shape it — will help you make decisions about what kind of retirement you want, what kind you can afford and what other resources you’ll need to get there.

“You’ll want to have a plan for how and when you will take advantage of your Social Security retirement benefit before it’s time to take it,” says Martin Booker, AARP program manager for financial resilience. “The earlier that you learn the details of Social Security, the more time that you can plan to live your best life in retirement.”

Here are six key things to know about Social Security before you’re of age to collect it.

1. How long you work and how much you make matter.

The Social Security Administration (SSA) calculates your benefit by determining your monthly average income over the 35 highest-earning years of your working life, adjusted to account for historical changes in wages. You don’t need to have worked 35 years to qualify for retirement benefits — most people do so after about a decade in the workforce. But if you work fewer than 35 years, there will be years with zero income figured into your calculation, reducing your benefit amount.

On the other hand, years 36 and beyond could produce bigger future payments if those years are among your most lucrative (as is the case for many workers in their 50s). They will push lower-earning years from early in your work life out of the benefit equation.

Working longer, or holding on to a better-paying job for its own sake, may not be the right choice for everyone nearing retirement age. But keep in mind how a late career shift or early exit could affect not just your present income but your future Social Security payment.

2. Benefits get bigger the longer you put off taking them.

You can claim retirement benefits as early as age 62, but you only become entitled to your full benefit — 100 percent of the amount calculated from your lifetime earnings — when you reach full retirement age (FRA), which will be 67 for people born in 1960 or later (that is, anyone currently 62 or younger).

If you claim before then, Social Security reduces your benefit by a fraction of 1 percent for each month remaining until you reach your FRA. Those fractions add up: If you file when you turn 62, your benefit will be 30 percent lower, and that reduction is locked in for life.

The flip side is that there’s a bonus for waiting past your full retirement age. For each month beyond FRA that you put off filing, Social Security adds to your eventual benefit amount. By waiting until 70, the age when your benefit maxes out, you’ll get 24 percent more than your full retirement age benefit.

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Deciding when to file may not be just a matter of getting the biggest benefit. Your health or finances might argue for an early start. What’s important is understanding the ramifications so you can make an informed decision when you reach claiming age.

3. You can get a preview of your benefit.

Your Social Security statement, accessible online if you have a My Social Security account, shows your estimated retirement benefit for each claiming year from 62 to 70, based on your past and projected future earnings. You can get similar estimates by plugging your age and income information into AARP’s Social Security Calculator.

These estimates are inexact; they don’t reflect possible swings in your income before you retire, for example, or the positive impact of future cost-of-living adjustments (COLAs). Your eventual benefit may be different. But they do provide a baseline for what you can expect from Social Security.

4. You’ll need other sources of income.

Social Security was never intended to fully replace retirees’ work earnings. On average, retirement benefits cover about 40 percent of your past income (the proportion is typically larger for low-income workers and smaller for high earners).

The rule of thumb from financial advisers is that you need to replace around 80 percent of your working income to maintain your lifestyle in retirement. Factoring in expected Social Security income can help you strategize to bridge the gap.

For example, you might step up contributions to an IRA or 401(k) so you’ll have more savings to draw on, or decide you want to work a little longer. These additional income sources can also help you put off filing for Social Security and thus increase your lifetime benefit.

5. Your retirement benefit might not be your biggest benefit.

If you are married, or were, you could be eligible down the road for benefits on both your own earnings record and that of your mate. That holds true even if the marriage ends due to divorce or death.

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Social Security calls this “dual entitlement.” It doesn’t mean you’ll get two benefits combined; the SSA will pay you the higher of the two amounts. That could be a spousedivorced-spouse or survivor benefit rather than your own retirement payment, if your mate is, or was, the higher earner in the house.

Be sure to check your potential eligibility for these family benefits and investigate related claiming strategies as part of your Social Security planning. They could provide paths to higher lifetime benefits and greater financial flexibility in retirement.

6. Social Security isn’t going away — but you might get less from it.

“Some people, you just cannot get it out of their heads that Social Security is not going to go bankrupt tomorrow,” Lee says. This can lead them to claim early, regardless of other factors, for fear there won’t be anything left to claim if they wait.

Social Security’s finances do need attention. A $2.8 trillion cash reserve in the trust funds from which benefits are paid is projected to run out in 2035, according to the latest annual report from the program’s trustees. But that’s just the surplus. Social Security would continue to collect, and pay benefits from, the payroll taxes that workers pay into the system each year.

If the surplus does run out, benefits would be reduced by about 20 percent — certainly something to consider in making long-term plans around your anticipated retirement resources. To avoid that benefit cut, Congress will have to take steps to bolster Social Security’s financial standing, as it did when the system’s reserves were similarly dwindling in the early 1980s.