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Don't Make These 4 Big Social Security Mistakes

By Dan Caplinger – Updated Sep 26, 2018 at 4:45AM

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They're easy to avoid if you know about them.

Social Security provides valuable benefits, and it's important not to waste the opportunity to get them. But given just how complex it is to evaluate your Social Security benefits, it's not surprising that some people make mistakes. Some mistakes are more serious than others, though, and you don't want to do something you could easily have avoided.

With that in mind, here you'll find four key mistakes that people are still making with their Social Security benefits. By taking them into account in your decision-making, you'll be able to make smarter choices rather than falling into the traps that have snared so many of your fellow retirees.

Keyboard with green benefits button.

Image source: Getty Images.

1. Trying to use strategies that don't work anymore

One problem with having the internet at your disposal is that old resources rarely go away. That means that you can get lots of information about what the right way to handle your Social Security was 10 years ago -- without necessarily knowing whether it's still smart or doesn't work at all.

The best example is the file-and-suspend strategy, which used to allow a worker to claim benefits and immediately suspend them. That opened the door for a spouse and other family members to claim benefits on that worker's earnings record, while also letting the worker's own retirement benefit grow until the worker lifted the suspension and started receiving payments. However, a law change took away file-and-suspend for those who didn't act before the May 2016 deadline, and so anyone who looks at old articles talking about the strategy needs to understand that the strategy is simply no longer available.

2. Failing to claim even after waiting won't do any good

There's a trade-off with when you claim Social Security. File early, and your monthly payments will be smaller. Wait, and you can get larger payments. But that isn't true forever, as there's a limit to how much bigger you can make your Social Security benefits by waiting to claim them.

What's confusing is that this date is actually different depending on the type of benefits you want to claim. For your own retirement benefits based on your work history, delayed retirement credits are available until age 70. Beyond your 70th birthday, no further increase in your monthly payment is possible, so there's no reason not to go ahead and claim at that age.

If you're looking to collect only spousal benefits, however, a different date applies. No delayed retirement credits apply to spousal benefits, so if you wait beyond your full retirement age -- typically between 66 and 67 -- then you're potentially leaving money on the table. It's true that you might not be allowed to claim spousal benefits at full retirement age if your spouse hasn't yet filed for retirement benefits. But if you can claim them when you reach your full retirement age, then waiting any longer on spousal benefits just doesn't make sense.

3. Not coordinating all your benefits

Where things get really complicated is when you have benefits both under your own work history and under a spouse's work history. With spousal benefits, in general, you can't just claim spousal benefits without also claiming any retirement benefits you're entitled to receive. Those who turned 62 by Jan. 1, 2016 can take advantage of an older law that allows filing as a spouse first without claiming retirement benefits, but even then, the provision only applies once the person reaches full retirement age. And unless that exception applies, you have to wait if you want to get any increase in benefits on your own work record due to delayed retirement credits.

By contrast, survivor benefits due to the death of your spouse require even more planning. That's because you can claim retirement benefits or survivor benefits separately, rather than having to claim them both at the same time. Sometimes, it makes sense to claim survivor benefits first while letting your retirement benefit grow, while in other cases, claiming your own retirement benefits first is smarter. Only by coordinating both can you maximize what you'll get over your lifetime from Social Security.

4. Getting divorced before the 10-year rule kicks in

Lastly, if you're contemplating a divorce, it's critical to consider the way Social Security protects ex-spouses. Social Security rules say that if you were married for at least 10 years before divorcing, then you can claim Social Security benefits on the other ex-spouse's work record.

Admittedly, a divorce isn't necessarily the best time to be doing retirement planning. But if you get divorced after nine years and 11 months, you won't be able to get the benefits that you'd receive if you lasted until 10 years and a day. Given the hundreds of thousands of dollars at stake, it's worth paying attention to these rules in order to let the Social Security system help provide a financial gain to everyone involved.

Social Security is complex enough that you won't always be perfect, but the four mistakes above are fairly easy to avoid. Just by knowing about them, you'll be in a better position to find smarter alternatives to make the most of your Social Security benefits.

Editor's note: A previous version of this article failed to include grandfathering provisions for the filing of a restricted application for spousal benefits. The author and the Fool regret the omission.

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