Social Security may seem like a relatively easy program to navigate, and in many ways, it is. The application process for retirement benefits is quick and straightforward, and there's little you need to do after you've applied, aside from keeping your bank account and address information current.
Having said that, there's more to Social Security strategy than you may think. The wrong moves could cost you tens of thousands of dollars in potential benefits, and here are three missteps to avoid.
Claiming too early if you're still working
Americans who qualify can claim Social Security anytime between the ages of 62 and 70, and the vast majority of Americans claim at their full retirement age or sooner. In fact, 62 is the most common claiming age, by a significant margin. And to be fair, Social Security is designed so that the average person will get roughly the same amount of benefits (inflation-adjusted) regardless of when they claim.
It's also true that once you've reached full retirement age, you are entitled to claim your entire Social Security benefit, no matter how much you earn from work.
However, if you've reached your full Social Security retirement age and are still working, it's also important to remember that your earnings can still boost your Social Security benefit. Specifically, the Social Security formula takes your highest 35 years of inflation-indexed earnings into account. And, the later years of many American's careers are also some of their highest-earning years.
Here's the key point: A year of relatively high earnings will replace the lowest of the 35 years of earnings used in the Social Security benefit formula.
If you're past full retirement age and are earning significantly more now than you were toward the beginning of your career, or if you have some gaps in your work record, holding off on claiming your Social Security retirement benefit could help boost your income in two ways. Not only will your benefit rise by 8% per year for waiting, but your 35-year average could also substantially improve, raising the base benefit amount to which those 8% delayed retirement credits are applied.
Delaying a spousal benefit past full retirement age
Thanks to Social Security spousal benefits, spouses who didn't work or earned comparatively little throughout their working life are entitled to much-needed retirement income.
You can read our full guide to Social Security spousal benefits if you want to learn more, but the short version is that if your calculated Social Security retirement benefit is less than half of your spouse's, or if you don't qualify at all, a spousal benefit will kick in to make up the difference. In other words, if your spouse is entitled to $1,600 per month at full retirement age, a spousal benefit would ensure that you received $800 per month at your full retirement age.
However, there are two very important points you need to know. First, unlike standard Social Security retirement benefits, spousal benefits don't get any bigger after full retirement age. If your spouse's full retirement age is 67, and they wait until 68 to claim a spousal benefit, their monthly check won't get any bigger.
Second, the key requirement to be eligible for a spousal benefit is that the higher-earning spouse must have claimed their own benefit already.
The bottom line: If your spouse is entitled to a benefit on your work record, think twice before you delay retirement beyond their full retirement age.
Not checking your earnings record
As I mentioned, your Social Security benefit is based on your 35 highest-earning years, indexed for inflation. The Social Security Administration, or SSA, keeps track of your Social Security taxable earnings every year, and you can take a look at your earnings record on your latest Social Security statement. (Note: Your Social Security statement is available on www.ssa.gov by creating a "my Social Security" account, if you haven't already.)
Because your benefit will be based on the earnings data on your Social Security statement, it's extremely important to make sure the information on the statement is accurate.
Errors in Social Security earnings records aren't widespread, but they are more common than you may think. For example, in the 2012 tax year, the SSA said that $71 billion in wages couldn't be matched to any earnings records, and that only about half of these mismatches were eventually corrected.
Since your Social Security benefit is primarily derived from the amount of money you earn throughout your career, wouldn't it make sense that you want credit for all of the money you've earned? A single missed earnings error could potentially cause you to miss out on $30,000 in lifetime benefits, according to Social Security Intelligence, so it's certainly worth your time to make sure your earnings record is correct.