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3 Mistakes That Could Sabotage Your Social Security Benefits

By Katie Brockman - Dec 6, 2020 at 2:00PM

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Boost your benefits by avoiding these blunders.

Social Security benefits are a major source of income for millions of retirees. In fact, around one in five baby boomers says Social Security benefits will be their only income source in retirement, according to a survey by the Nationwide Retirement Institute.

However, that same survey also found that only 37% of boomers are confident in their knowledge about how the Social Security program works.

If you're going to be relying on your benefits but aren't sure how your monthly checks are calculated, you risk making mistakes that could sabotage your financial future. As you're planning for retirement, be sure to avoid these three Social Security blunders.

Man sitting at a table,  looking at a laptop

Image source: Getty Images.

1. Claiming at the wrong age

Once you turn 62 years old, you're eligible to start taking Social Security. But if you hold off on filing, you'll receive higher monthly payments.

By claiming at age 62, your monthly benefit amount will be reduced by up to 30%. However, sometimes claiming early can be the right decision. If you have reason to believe you may not live into your 80s or beyond, claiming as early as possible makes sense. Filing early might also be a smart move if you have a healthy retirement fund. Although your checks will be smaller, they'll give you some extra spending money when you're still relatively young and healthy.

Delaying benefits generally makes the most sense for those who can't survive on their savings in retirement. You'll receive your full benefit amount plus up to 32% extra each month if you wait until age 70 to file for Social Security. If you have little to nothing saved, those larger checks can make a significant difference in your retirement lifestyle.

If you claim too early, you could be stuck with smaller checks for the rest of your life. On the other hand, though, if you wait too long to claim, you could regret the years you weren't collecting benefits. No matter what age you choose to claim, make sure you've thought about this decision carefully.

2. Not working for at least 35 years

To avoid having your benefits reduced, you'll need to claim at your full retirement age (FRA) or beyond. For those born in 1960 or later, your FRA is 67 years old. If you were born before 1960, your FRA is either 66 or 66 and a certain number of months, depending on the exact year you were born.

Your benefit amount at your FRA is calculated by taking an average of your wages over the 35 years of your career that you earned the most. That number is then adjusted for inflation, and the result is your basic benefit amount.

If you want to receive as much as possible from Social Security, make sure you've worked a full 35 years or more before you begin claiming. If you don't, you'll have zeros added to your earnings average. That will reduce your average and result in a smaller benefit amount.

3. Not checking your statements online for mistakes

Everyone makes mistakes occasionally, including the Social Security Administration (SSA). The SSA uses your earnings record to calculate your benefit amount, and if there are mistakes in your record, your benefit amount won't be accurate.

The end of the year is the perfect opportunity to check your earnings record and ensure that everything is accurate. To do that, you can create a mySocialSecurity account and review your statements online. If you notice any incorrect information, contact the SSA -- catching mistakes now can result in more money in benefits later.

Most retirees will end up relying on Social Security to some extent during their senior years, making it vital that you maximize your benefits. By avoiding these three common mistakes, you can collect as much as possible in Social Security benefits.

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