Whether you’re counting on Social Security to fund most of your retirement income or supplement it, you want to make sure you get all of the money you’re entitled to. However, with so many ways to claim benefits — especially if you’re married or used to be married — small mistakes could end up costing you a lot of money over the rest of your life.
By knowing which Social Security mistakes to avoid, your retirement will be easier to handle — even if you aim to retire early.
The Mistake: Not Checking Your Earnings Record
Even if you’re decades away from claiming Social Security, you could be making a big mistake if you don’t keep track of your yearly earnings. The amount of Social Security benefits you receive depends on your earnings record, so if that record is incorrect, you might not receive the benefits you’re entitled to.
Errors can occur for a variety of reasons, including an employer reporting an incorrect amount of earnings or your earnings not showing up because you got married or divorced and your name change has not been processed correctly.
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What To Do: Check Your Social Security Statement While Working
To avoid losing money due to errors in your earnings record, check your statement annually. If you notice errors, gather proof of your earnings to send to the Social Security Administration, such as your W-2 or pay stubs. Once the Social Security Administration has verified your claim, it will correct your record.
It’s much easier to prove an error that happened the previous year, when you still have your records handy, than it is for 10, 20 or more years ago because you probably don’t have a paper trail going back that far.
The Mistake: Not Working Long Enough
To qualify for Social Security retirement benefits, you need at least 40 work credits. You can earn up to four credits each year based on your earnings. For 2023, you must earn $1,640 to get one credit, or $6,560 to get the maximum of four credits.
In addition, your benefits are calculated based on the average of your 35 highest-earning years. If you have fewer than 35 years of earnings, $0 will be averaged in for each year you don’t have earnings.
What To Do: Do the Math Before Retiring
As you’re approaching retirement, check your earnings statement first to make sure you have enough credits to qualify for Social Security. If you don’t already have 35 years of earnings, consider whether working an additional year or two could help boost your Social Security benefits.
For example, if you worked a first career where you weren’t covered by Social Security, working for an extra year or two might ensure you qualify for Social Security benefits or boost your monthly benefit amount.
The Mistake: Taking Social Security Too Early
You can claim Social Security benefits as soon as you turn 62 years old. However, for everyone born after 1959, the reduction for claiming benefits at age 62 is 30%. The lower benefits are permanent: Your benefits won’t go up once you reach full retirement age.
What To Do: Wait Longer Before Claiming Benefits
As much as you might like to quit your job the day you’re eligible for Social Security, that might not be the best move financially. If you’re in good health and expect to live a long retirement, waiting to maximize your benefits could be crucial in your later years.
If you can wait past full retirement age, your benefits could increase by as much as 8% per year you wait — up to age 70.
The Mistake: Waiting Too Long To Claim Benefits
Even though the monthly benefit goes up each month you wait to claim your benefits, that doesn’t mean it’s always best to wait as long as possible. If you live to the average life expectancy, theoretically it won’t matter whether you claim benefits early or late. That’s because the amount of the benefit reduction for claiming early and the increase in benefit for delaying your claims will even out.
But very few people are precisely average. If you’re in poor health, claiming early could result in more benefits over the rest of your life. In addition, if you have cash flow trouble, an infusion of monthly benefit checks at a younger age could help you pay off debt or avoid taking on debt, which could ultimately save money in the long run.
What To Do: Consider Your Situation Before Taking Benefits
Don’t assume that waiting until age 70 is best for your situation. Instead, run the numbers yourself or work with a financial advisor, and consider your unique circumstances. For example, if you have health issues and don’t expect to live until 75, much less 80 or older, you’ll receive more in total benefits if you claim them earlier.
Regardless of when you decide to claim your Social Security benefits, make sure you sign up for Medicare at age 65.
The Mistake: Only Considering Your Own Benefits
If you file for the Social Security benefits you’re entitled to based solely on your earnings record, you could be missing out on a larger benefit. This is especially important if you don’t have enough work credits to qualify based on your own earnings record.
For example, if you were a stay-at-home parent while your spouse worked, you might not have earned the minimum 40 work credits to qualify or your benefit might be small. However, you could still qualify for Social Security benefits under your spouse’s work record.
What To Do: Consider Your Spouse’s Earnings Record
Check to see how much you would be eligible to receive under your spouse’s work record before deciding how to claim benefits.
If you’re divorced, you could also claim benefits under your ex-spouse’s earnings record if the marriage lasted at least 10 years, you are age 62 or older, you are unmarried, your ex-spouse is eligible to receive Social Security retirement or disability benefits, and your benefit from your own work is less than what you would receive under your ex’s earnings record.
The Mistake: Not Coordinating Benefits With Your Spouse
If you’re married and you and your spouse each look at your benefits in a vacuum, you could be missing out on strategies to maximize your combined retirement benefits.
For example, if your spouse plans to claim benefits based on your Social Security earnings record, the spouse won’t receive any extra credit for delaying claiming benefits beyond full retirement age.
What To Do: Coordinate Your Claiming Strategies
When you and your spouse work together on your Social Security plan, you can make sure you’re maximizing your combined retirement benefits.
For example, a low-earning spouse might start claiming benefits based on the high-earning spouse’s income at full retirement age. Meanwhile, the higher-earning spouse delays benefits to increase their retirement credits. This strategy can be tricky, so consulting a financial advisor is worth the cost.
The Mistake: Not Planning For Taxes on Social Security Benefits
Up to 85% of your Social Security benefits could be subject to federal income taxes if you earn substantial outside income, such as wages or dividends. The percentage of your benefits that are subject to income taxes depends on your combined income, which equals your adjusted gross income, any nontaxable interest income and half of your Social Security benefits.
What To Do: Proactively Plan For Taxes
Engaging in tax planning can help ensure you aren’t paying the IRS any more of your Social Security benefits than you have to.
For example, if you’re planning to donate money to charity, consider a qualified charitable distribution to satisfy your required minimum distribution from an IRA rather than using other funds. That way, the distribution doesn’t add to your taxable income and might make more of your Social Security benefits count as taxable income.
The Mistake: Ignoring Work Rules for Early Benefits
If you plan to continue working after you start collecting Social Security benefits, you could find yourself coming up short financially.
In the years before you reach full retirement age, your Social Security benefit is reduced by $1 for every $2 you earn over the annual limit. In 2023, the yearly limit for earners younger than full retirement age is $21,240.
In the year you reach full retirement age, your Social Security benefit is reduced by $1 for every $3 you earn over the annual limit. For 2023, the yearly limit for these earners is $56,520.
What To Do: Budget For Early Retirement
If you rely on early Social Security benefits to supplement your working income in the years before you reach full retirement age, make sure you account for the rules for working while earning Social Security. It’s important to be aware of the potential reduction in your benefits.
Once you reach full retirement age, there’s no further reduction. Your benefit amount will be recalculated at this time to leave out the months when benefits were reduced or withheld due to excess earnings. Without proper planning, however, you could face short-term cash-flow problems.
The Mistake: Remarrying Without Knowing How It Will Affect Your Benefits
Divorced seniors who are 62 years and older can receive benefits on their ex-spouse’s record, but only if they are unmarried. If you were relying on your ex-spouse’s benefits because your income was low or you didn’t work, you would lose the opportunity to receive their benefits if you remarry.
What To Do: Know the Implications Before Tying the Knot
Marriage can sometimes be as much about finances as it is about love, especially later in life. If you will struggle financially because you’ll miss out on your ex-spouse’s Social Security benefits by remarrying, take some time to figure out if it’s worth it for you to do it.
The Mistake: Waiting Until 70 To Collect Spousal Benefits
Delaying your benefits beyond full retirement age will only qualify you for delayed retirement credits if you are the primary beneficiary. Social Security benefits you receive as a spouse do not include delayed retirement credits, so there is no incentive to delay collecting Social Security past your full retirement age. If you wait, you’ll have missed out on years you could have been collecting.
What To Do: Retire at Full Retirement Age To Receive Your Maximum Spousal Benefits
Although you won’t get credits for delaying benefits past the full retirement age as a spouse, you should plan on retiring at your full retirement age to get the maximum benefits if you’re going to collect spousal benefits. When you reach full retirement age, you’ll be eligible to receive 50% of your spouse’s benefits, which is the maximum amount.
If your full retirement age is 67, and you start receiving your spouse’s benefits early at age 62, your benefit amount would only be about 32.5% of your spouse’s benefits.
The Mistake: Assuming Social Security Benefits Can Fully Cover Your Living Expenses
The average monthly Social Security benefit for retired workers was $1,827 per month as of January 2023. Although it might be possible to live off Social Security alone in some instances, it would likely require a big paring down of your lifestyle. For many people, however, it may not be feasible to live entirely off of Social Security benefits. Planning to live on Social Security alone — and then not being able to — puts you at risk for financial problems down the line.
What To Do: Create a Well-Thought-Out Financial Plan Before Retiring
Social Security can be a great supplement to other sources of retirement income, but it should not be your only source. Make sure you have a healthy nest egg saved in a 401(k) or IRA, and ideally set yourself up to have passive income streams that will continue to pay out in your post-9-to-5 life.
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Michael Keenan contributed to the reporting for this article.