In 2018, pop singer Cardi B inspired a younger generation by rapping about money moves. Sadly, the older set has yet to hear someone famous lyricize about making smart Social Security moves. Perhaps Neil Diamond is up for the challenge. Couldn't you just imagine his velvety voice telling us how to make the most of our payroll-funded retirement plan?
Diamond would likely remind us that Social Security is not intended to be your only source of retirement income. You need savings on hand, too, to supplement that monthly benefit check. But even if your savings will do the heavy lifting to support you after you leave the workforce, you're smart to optimize that Social Security benefit as well. Here are three smart Social Security moves you can make today.
1. Check your earnings history
Your Social Security benefit is calculated from your 35 highest-paid years of working. The Social Security Administration (SSA) collects this information from your W-2 wage reports , which are provided by your employers. If the information isn't accurate, your benefit will be calculated incorrectly. And even a small difference could cost you thousands over the course of your retirement. A $50 underpayment each month, for example, adds up to $15,000 over 25 years.
It's up to you to verify that the earnings record on file with the SSA is correct. You can do this easily by creating an account and logging into the my Social Security website. Look for a link labeled, "View Earnings History." Make it a habit to check your earnings record once annually against your tax returns, W-2s, or pay stubs. If you do see a discrepancy, you'll need to contact SSA and show those same documents to get the errors corrected.
2. Consider savings and longevity when timing your claim
You can claim Social Security as early as age 62 or as late as age 70. The timing of your claim influences your monthly benefit amount. Claim earlier and your monthly benefit is lower; claim later and your monthly benefit is higher. No matter when you claim, you keep getting those monthly payments until you die.
Because your Social Security payments last as long as you do, they're a nice complement to the retirement income you earn from your savings. Savings do not last forever, of course. And outliving your savings may be a very real concern, particularly if you are in good health and your elder relatives all seem to live to a sturdy 96 years old. In that case, you might choose to delay retirement for a few extra years to pad your net worth and raise your monthly Social Security benefit at the same time. Even a slightly higher benefit takes some pressure off your savings and gives you added peace of mind.
On the other hand, you might be in poor health and less concerned about outliving your savings. That's when you might prioritize retirement now and claim your Social Security early.
3. Choose a representative payee
The SSA allows you to select someone to manage your benefits for you, should you become unable to do so. He or she would receive your monthly benefit on your behalf and use it to provide for your food, housing, healthcare, clothing, and other essential expenses.
You can designate up to three potential representative payees in priority order. The SSA accepts these designations when you initially file for benefits, or at any time while you are receiving benefits. Your designees are not guaranteed the job, nor will anyone receive any access to your benefits until you are unable to manage your own finances. At that point, the SSA reviews your designees for suitability and appoints an appropriate representative payee to you.
As you are strategizing about the timing of your Social Security claim, also think about whom you'd trust for the role of representative payee. It's smart to submit your designees with your initial claim filing, so you know you'll be in good hands if you become incapacitated in any way.
Check your numbers and plan ahead
A Social Security ballad by Neil Diamond would surely be a bigger hit than his song "Sweet Caroline," right? Well, maybe that's up for debate. But what isn't debatable is the importance of paying attention to your earnings numbers, being strategic about the timing of your Social Security claim, and choosing someone you trust to manage your Social Security benefits if you cannot.