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3 Ways You Could Be Sabotaging Your Social Security Benefits

By Katie Brockman - Jul 1, 2019 at 7:02AM

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You could be receiving less than you expect in benefits by making these common mistakes.

Social Security can be a lifeline in retirement, particularly if your savings are sparse. Considering 45% of baby boomers don't have anything saved for retirement, according to the Insured Retirement Institute, a lot of retirees are going to be depending on their Social Security benefits just to get by.

If Social Security is going to be your primary source of income, it's important to ensure you're doing everything you can to maximize your checks. However, there are a few common ways you may be sabotaging your benefits without realizing it.

Social Security card next to calculator and statement

Image source: Getty Images

1. Not knowing your full retirement age

Your full retirement age (FRA) is either age 66, 67, or somewhere in between, and claiming at this age is the only way to receive 100% of the benefits you're theoretically entitled to. Yet only 24% of those age 50 and over know what their FRA is, a survey from the Nationwide Retirement Institute and The Harris Poll found.

Furthermore, the survey also noted that nearly 70% of soon-to-be retirees believe they're eligible to receive their full benefits before they really are, with the average person thinking they can claim benefits at age 63 to receive their full amount.

However, if you claim before you reach your FRA, your benefits will be reduced by up to 30%. Given the fact that Social Security benefits alone may or may not cover all your expenses (the average beneficiary only receives around $1,400 per month, according to the Social Security Administration), a 30% reduction could make it even more challenging to make ends meet with just your benefits.

2. Waiting until after age 70 to claim benefits

While claiming benefits before you reach your FRA will result in smaller checks, waiting until beyond your FRA to claim will give you a boost in benefits. For those with a FRA of 66 years old, for example, waiting until age 70 can provide an additional 32% on top of your full amount.

Some savvy workers, then, may think the best plan of action is to hold off on claiming benefits for as long as possible. A third of baby boomers say they plan to wait until past age 70 to retire, according to a survey from the Insured Retirement Institute, so on the surface, it makes sense to delay claiming benefits until past age 70 too.

That sounds like a good idea in theory, but after you turn 70, you won't receive any additional benefits by waiting to claim. So for every month you wait past age 70, you're simply missing out on money. Even if you're still working at age 70 and beyond, it's a good idea to claim your benefits anyway. Because you've passed your FRA, the income you receive by working won't affect how much you receive in benefits -- so just consider the income you receive from Social Security icing on the cake.

3. Not understanding how divorce affects benefits

If you've been divorced and your previous marriage lasted at least 10 years, you or your ex-spouse may be eligible for additional Social Security benefits. There is a lot of fine print to comb through, however, which is why it's easy to get confused when figuring out whether you're eligible to claim benefits based on an ex-spouse's work record. For those who are eligible, though, you could be earning extra money each month with no extra effort.

If you're receiving more in Social Security benefits than your ex-spouse, you're not eligible to receive any additional money based on your ex-spouse's employment record. In addition, even if your ex-spouse is claiming benefits based on your record, your benefits won't be affected. In other words, your ex-husband or ex-wife cannot "take" benefits from you.

But if you're the lesser-earning ex-spouse, you may be eligible to receive money based on your ex's work record. There are some caveats, though. First, you have to be at least 62 years old. Second, you have to be unmarried. Third, if your ex-spouse is eligible to receive Social Security benefits but hasn't claimed them yet, you need to have been divorced for at least two years before you can file for benefits based on their work record.

Also, if you're eligible for your own Social Security benefits but the amount you'd receive is less than what your spouse is entitled to, the Social Security Administration will pay out your benefits first. Then if you're also eligible to receive benefits based on your ex-spouse's record, you'll receive an additional amount on top of what you're already receiving based on your own work record.

Confused yet? If so, it's understandable. Let's look at a hypothetical example for some clarity. Say you and your ex-spouse were married 20 years but have been divorced 10 years, you're 62 years old, and you're not married. By claiming your own benefits, you'd receive $750 per month, and your ex is entitled to receive $2,000 per month in benefits at FRA. Because you meet all the requirements to claim on your ex's work record, you'll receive the $750 per month you're entitled to, but you might also get an additional amount of up to $250 per month based on your ex's work record to get you up to the maximum of half of $2,000, or $1,000. Exactly what you'll get depends on your own FRA and the age at which you choose to claim.

Social Security can be a confusing topic, but it's crucial to understand at least the basics of how the program works -- especially if you're expecting to depend on your benefits for a good portion of your retirement income. By ensuring you're maximizing your potential earnings, you'll be setting yourself up for a happier and less stressful retirement.

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