Social Security serves as a lifeline for millions of seniors. But a single mistake on the road to claiming benefits could reduce that crucial income stream for life. Here are three common Social Security blunders you should make every effort to avoid.
1. Not knowing your full retirement age
Your Social Security benefits are based on your lifetime earnings -- specifically, your average wages, adjusted for inflation, during your 35 highest-paid years on the job. But you're not entitled to your full monthly benefit until you reach what's known as full retirement age, or FRA.
FRA is a function of your year of birth, and you can consult this table to see when yours is:
|
Year of Birth |
Full Retirement Age |
|---|---|
|
1943-1954 |
66 |
|
1955 |
66 and 2 months |
|
1956 |
66 and 4 months |
|
1957 |
66 and 6 months |
|
1958 |
66 and 8 months |
|
1959 |
66 and 10 months |
|
1960 or later |
67 |
DATA SOURCE: SOCIAL SECURITY ADMINISTRATION.
Not knowing your FRA could cause you to claim Social Security at the wrong time. Yet in a Nationwide survey released earlier this year, 76% of older Americans could not correctly identify their FRA. Commit that number to memory, because if you don't, you could wind up slashing your benefits for life.
IMAGE SOURCE: GETTY IMAGES.
2. Filing too early
Though you're not entitled to your full monthly Social Security benefit until you reach FRA, the Social Security Administration (SSA) allows you to file as early as age 62. And many seniors jump on that opportunity, so much so that 62 is actually the most popular age to claim benefits.
But for each month you file for Social Security ahead of FRA, your benefits get reduced by a small percentage that can add up if you file really early. File at 62 with an FRA of 67, and you'll be looking at a whopping 30% hit on your benefits, which will remain in effect permanently unless you manage to withdraw your application within a year, and also repay the SSA all of the money it paid you.
Many seniors claim Social Security at 62 out of impatience, or out of fear that the program is heading toward bankruptcy (which it isn't). If you don't have a good reason to file for benefits before FRA (such as having lost your job), then consider the financial upside of waiting -- and hold off until FRA, or even beyond. The SSA allows you to score an 8% boost for each year you delay your benefits up until age 70.
3. Not checking your annual earnings statements
Each year, the SSA issues you an earnings statement which summarizes your taxable wages and also estimates the benefit you'll be eligible to collect at FRA. If you're 60 or older, that statement comes in the mail. Otherwise, it's available on the SSA's website. Checking that statement for errors is important, because if you spot a mistake that works against you (like a lower annual wage than what you actually earned), it could cause your benefits to go down. But many Americans don't check those statements annually, and as such, put their benefits at risk.
In fact, only 43% of registered users on the SSA's website accessed their earnings statements in 2018, and while we can't know what percentage of older Americans who received those statements by mail actually read them last year, it's fair to say that many folks no doubt tossed them aside or filed them away without giving them a look. But a few minutes of your time could spell higher benefits down the line.
Chances are, Social Security will be a vital source of income during your golden years. Avoid these mistakes to make the most of those benefits during retirement.
