3 Things About Social Security Far Too Many People Don't Know

Social Security is a popular source of income for American retirees. Because of that, there are certain things about Social Security you might know, even if you aren't retired yet.

You may be aware that the earliest age you can claim Social Security is 62. And you might also know that you aren't able to collect your benefits without a reduction until full retirement age arrives, which is 67 for anyone born in 1960 or later.

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But there are some less obvious Social Security rules you may not be aware of. Here are three you should know.

1. Your benefits won't replace your entire paycheck -- not even close

You may be looking forward to Social Security replacing your entire paycheck once you retire. But if that's what you're anticipating, you may be in for disappointment.

If you earn an average paycheck, you can expect Social Security to take the place of about 40% of it in retirement. But that assumes that benefits aren't cut broadly.

Although benefit cuts are not a given, Social Security is facing a serious financial shortfall in the coming years. If lawmakers don't find a way to shore up the program's finances, benefit cuts may be inevitable.

Between that and the fact that Social Security will only offer so much replacement income to begin with, it's important to save well for retirement. If you haven't started funding an IRA or 401(k), do so now, and keep contributing money every month until your career comes to an end.

2. You can claim benefits even if you never worked

You may know that you become eligible for Social Security in retirement by working and paying into the system. But don't assume that if you never worked, you won't be eligible for benefits in retirement at all.

If you're married to someone who's eligible for Social Security, or you were married to someone in that boat, you may be entitled to spousal benefits. Spousal benefits max out at 50% of your current or former spouse's benefit at their full retirement age. This means that you can't expect to retire on a spousal benefit alone.

You also can't grow a spousal benefit by delaying your claim like you can for Social Security benefits based on your own earnings record. So all told, your spousal benefit checks may not be all that large.

However, if you have retirement savings, spousal benefits could supplement your IRA or 401(k) withdrawals quite nicely. So it pays to see if you're eligible for them.

If you're married, you can't claim spousal benefits until your spouse files for Social Security. But if you're divorced and were married for at least 10 years, you generally do not have to wait for your ex-spouse to sign up.

3. You get one do-over if you claim benefits at the wrong time

Because your filing age helps determine what monthly Social Security benefit you get, it's important to sign up at the right time. If you claimed benefits early, you might think you're stuck with those lower payments for life. But that may not be the case.

All Social Security claimants get one do-over in their lifetime. If you're within 12 months of the date you filed for benefits and you're able to repay all the money Social Security has paid you, you can withdraw your application and file again later. That could allow you to avoid getting stuck with a benefit that isn't meeting your financial needs because it's too small.

There's a lot to know about Social Security, and some of the program's rules may not be so obvious. Take the time to read up on Social Security, because the more you know, the better prepared for retirement you're apt to be.

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