Are you making these Social Security mistakes too?
Whether you rely on Social Security to cover the majority of your retirement income or to supplement it, you want to ensure that you receive all of the money to which you are entitled.
However, with so many different methods to claim benefits — especially if you’re married or used to be married — tiny mistakes may cost you a lot of money over the course of your life. Your retirement will be simpler to manage if you know which Social Security blunders to avoid — even if you plan to retire early.
1. The Mistake: Not Checking Your Income Statement
Even if you’re decades away from filing for Social Security, failing to keep track of your yearly earnings might be a costly error. The amount of Social Security benefits you get is determined by your earnings record; thus, if that record is wrong, you may not receive the benefits to which you are entitled.
Errors can happen for a variety of reasons, such as an employer reporting an inaccurate amount of earnings or your wages not showing up because you were married or divorced, and your name change was not properly recorded.
What To Do: While Working, Check Your Social Security Statement
Check your statement annually to avoid losing money due to mistakes in your earnings record. If you discover any mistakes, obtain documentation of your wages to transmit to the Social Security Administration, such as your W-2 or pay stubs. The Social Security Administration will amend your record after your claim has been confirmed.
It’s a lot simpler to prove an error that occurred the previous year while you still have your records accessible than it is to prove an error that occurred 10, 20, or more years ago since you usually don’t have a paper trail that far back.
2. The Mistake: Not Working Long Enough
You must have at least 40 work credits to be eligible for Social Security retirement benefits. Based on your earnings, you can earn up to four credits each year. In 2019, for example, you had to earn $1,360 to qualify for one credit or $5,440 to qualify for the maximum of four credits.
Furthermore, your benefits are based on the average of your 35 highest-earning years. If you have less than 35 years of earnings, $0 will be averaged for each year you have no earnings.
What to Do: Before Retiring, Do the Math
Check your earnings statement first as you near retirement to ensure you have enough credits to qualify for Social Security. If you don’t already have 35 years of earnings, think about working an extra year or two to supplement your Social Security payments.
For example, if you worked a first job that wasn’t covered by Social Security, working for an extra year or two might assure you qualify for Social Security payments or increase your monthly benefit amount.
3. The Mistake: Taking Social Security at an Unsuitable Age
You can begin receiving Social Security payments as soon as you reach the age of 62. However, for those born after 1959, the reduction for collecting benefits at the age of 62 is 30%. The lesser benefits are permanent: Once you reach full retirement age, your benefits will not increase.
What to Do: Delay claiming benefits for a longer period of time
Even if you want to quit your work the day you become eligible for Social Security, it may not be the greatest financial option. If you’re in good health and want to retire for a long time, waiting to maximize your benefits may be critical in your later years.
If you can wait over the full retirement age, your benefits might grow by up to 8% every year, up to the age of 70.
4. The Mistake: Waiting Too Long to Claim Benefits
Even while the monthly payment increases with each month that you wait to claim your benefits, it is not always ideal to wait as long as feasible. If you live to the average life expectancy, it makes no difference whether you claim benefits early or late. This is because the benefits decrease for claiming early, and the benefits gained for deferring your claims will balance out.
However, very few people are exactly average. If you are in bad health, filing a claim early may result in larger benefits throughout the course of your life. Furthermore, if you are struggling with cash flow, an influx of monthly benefit checks at a younger age might help you pay off debt or avoid taking on debt, which could ultimately save you money in the long term.
What To Do: Consider Your Situation Before Taking Any Benefits
Don’t assume that waiting until you’re 70 is the best option for you. Instead, do the figures yourself or consult with a financial counselor, taking into account your own circumstances. For example, if you have health problems and don’t expect to live to be 75, let alone 80, you’ll earn more total benefits if you claim them sooner.
Regardless of when you decide to receive your Social Security benefits, you must enroll in Medicare at the age of 65.
5. The Mistake: Only Considering Your Own Benefits
If you register for Social Security benefits only on the basis of your earnings record, you may be missing out on a greater amount. This is especially critical if you don’t have enough work credits based on your own earnings record to qualify.
For example, if you were a stay-at-home parent while your husband/wife worked, you may not have earned the required 40 work credits, or your benefit may be insufficient. However, you may still be eligible for Social Security payments based on your spouse’s employment history.
What to Do: Examine Your Spouse’s Earnings History
Before selecting how to claim benefits, determine how much you are qualified to get based on your spouse’s job record.
If you’re divorced, you may be able to claim benefits under your ex-earnings spouse’s record if your marriage lasted at least ten years, you’re 62 or older, unmarried, your ex-spouse is eligible for Social Security retirement or disability benefits, and your benefit from your own work is less than what you’d receive under your ex’s earnings record.