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3 Ways You Could Be Unknowingly Sabotaging Your Social Security Benefits

By Katie Brockman - Feb 24, 2020 at 9:32AM

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You might be hurting your monthly checks without even realizing it.

Approximately half of married couples rely on their Social Security benefits for at least 50% of their income in retirement, according to the Social Security Administration, and close to one-quarter depend on their monthly checks for 90% or more of their retirement income.

For many retirees, Social Security benefits make the difference between an enjoyable retirement and one rife with financial challenges. Even if you're not going to be depending on your benefits for the majority of your income during your senior years, you likely still want to maximize your money. To do that, there are a few things to avoid to ensure you're not inadvertently sabotaging your benefits.

A man in a suit dropping coins from his hands

Image source: Getty Images.

1. Claiming at the wrong age for your situation

You're allowed to begin claiming Social Security benefits at age 62 or any age thereafter. In order to receive the full benefit amount you're entitled to collect, you'll need to wait until your full retirement age (FRA) to begin claiming. If you were born in 1960 or later, your FRA is 67 years old. For those born before 1960, your FRA is either 66 or 66 and a certain number of months, depending on the year you were born. Claim before your FRA, and your benefits will be reduced, but if you wait until after your FRA (up to age 70), you'll receive extra money each month in addition to your full benefit amount.

There's no one-size-fits-all approach as to when is the best age to begin claiming, as everyone's situation is different. But there could be a wrong age to claim, depending on your situation. If you claim early but then end up living into your 90s or beyond, you could have potentially received more money over a lifetime if you'd instead waited until later to claim. On the other side of the coin, if you delay benefits but then only live a decade or so in retirement, you might have received more in lifetime benefits if you'd claimed early.

Also, although it's important to think about the decision from a financial perspective, it's also a good idea to look at the big picture. For example, if you've built a healthy retirement fund and have a long list of bucket-list activities you want to accomplish, you may choose to claim early so you can have some extra cash to accomplish those goals while you're relatively young. Whenever you choose to claim, keep in mind that your decision is typically final -- so make sure it's the right one.

2. Not working at least 35 years

Your basic benefit amount -- or the amount you'll receive by claiming at your FRA -- is based on the 35 highest-earning years of your career. The Social Security Administration averages your earnings over that time, adjusts it for inflation, and comes up with your basic benefit amount.

That means if you don't work a full 35 years, you'll have zeros added into your equation in place of the years you weren't working. Those zeros can significantly lower your earnings average, which in turn lowers your benefit amount.

The good news is that if you want to boost your benefit amount, you have the power to do so. By working longer than 35 years, you can increase your overall earnings average. Because only the highest-earning years are included in your equation, working longer now (when your income is likely higher than it was 35 years ago) can replace some of your lower-earning years from earlier in your career.

3. Not claiming all the types of benefits you're entitled to receive

When most people think of Social Security benefits, they think of the standard retirement benefit. But there are several different types of benefits available, and if you're not claiming all of the types you're entitled to, you could be missing out on extra cash.

Three of the most common types of benefits include spousal benefits, divorce benefits, and survivor benefits. With spousal and divorce benefits, you must be currently married or divorced from someone who qualifies for retirement benefits. To be eligible for divorce benefits, the marriage also has to have lasted at least 10 years, and you cannot currently be married. If you qualify for either of these types of benefits, the maximum you can receive is 50% of the amount your spouse or ex-spouse is entitled to receive at his or her FRA.

Survivor benefits are a little different. They are primarily available to widows and widowers, but ex-spouses, children, parents, and other relatives of the deceased can also be eligible to receive survivor benefits in certain circumstances. With all of these various types of benefits, the Social Security Administration typically won't notify you if you qualify -- so it's up to you to determine what benefits you're eligible for so you don't potentially miss out on additional money each month.

Social Security benefits are a critical component of a well-balanced retirement plan, so it's vital to ensure you're making the most of your monthly checks. The more you understand about how the program works and what types of benefits you're entitled to, the more money you could potentially receive.

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