Five Social Security Mistakes You Don’t Want to Make
Saving for retirement is challenging enough. The last thing you need is to make a mistake with your Social Security that could end up costing you money.
According to a 2019 study by United Income, a financial planning advisory service, retirees have lost (and are losing) $3.4 trillion as the result of errors when it comes to starting their Social Security benefits. The study also found that only 4 percent of retirees make the best financial decision for themselves when claiming Social Security.
Here are five common mistakes that may prevent you from getting the most out of your Social Security benefit:
1. Claiming your benefit too early
You stand to earn more money the longer you wait to claim your benefit, so if you’re in a position to delay, it’s something to consider. For example, if you claim your Social Security benefit at age 67, you’ll receive more per month than if you started at age 62. That said, not everyone is in a financial position to forgo Social Security income for an extended time. The trade-off with waiting to claim your maximum available benefit at age 70 (the latest time allowed) is that you either work longer or use savings to support yourself until that time. Some retirees will find that it’s better to take Social Security payments earlier while allowing their taxable investments to continue to grow. In other words, it’s not simply a matter of “claim early” vs. “claim late.” Rather, it’s about discussing and reviewing your financial situation to see what’s possible.
2. Miscalculating your earning years
The equation used to determine your benefits is based on your earnings in the 35 years in which you earned the most money. However, if you only earned income for 25 years, the equation will include 10 years of no earnings, which will substantially decrease your benefit. If you aren’t sure where you stand, log in to the Social Security Administration’s website to view your earning history and estimated benefit.
3. Assuming that you don’t qualify for benefits
Even if you’ve spent most of your career working in the home, you might still qualify for Social Security benefits if you’re married, divorced or widowed. Social Security allows you to claim benefits based on your spouse’s earnings, and generally people end up getting between 50 percent to 100 percent of the spouse’s benefit.
4. Assuming Social Security will cover all your financial needs
The most anyone can receive from Social Security is roughly $45,480 annually in 2020. So there’s a very good chance that you’ll need other sources of retirement income. The Social Security Administration offers a tool that gives you an estimate of your expected Social Security benefits.
5. Assuming Social Security will go away
Despite what you might have read, the Social Security program is not entirely in dire straits. Even if no changes are made to Social Security and funds run out, people’s benefit checks won’t disappear, though it’s possible they may decrease. But with Social Security becoming more and more of a concern among Americans approaching retirement, there’s a good chance that politicians will come together to solidify the program.
When it comes to Social Security, be well informed so you can help maximize your benefit. It could be the difference between a comfortable retirement and an amazing one.
Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SPIC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.