Social Security provides guaranteed monthly checks to seniors and their families in retirement, but what's not guaranteed is how much you get from the program. That depends largely on your choices, both during your career and at signup.
If you hope to squeeze as much out of the program as possible, you need to avoid these three costly mistakes.
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1. Not checking your earnings record
Your earnings record is where the government keeps track of how much money you've paid Social Security payroll taxes on over the years. It uses this information to calculate your retirement benefit when you eventually sign up for the program. You can view your earnings record by creating a my Social Security account.
Everyone should check theirs at least annually to make sure the information here is accurate. Errors, though rare, can lead to an incorrect Social Security benefit when you apply, which could cost you thousands of dollars over your lifetime.
Compare the information in your earnings record against your personal tax records showing your income for a given year. If you notice a mistake, fill out a Request for Correction of Earnings Record form and submit it to the Social Security Administration with copies of your documentation showing your correct income.
One note for high earners: You may not pay Social Security payroll taxes on all your income in a year. So it's possible your earnings record could accurately show a lower amount because your salary exceeded the maximum taxable income for that year. If you think this may have been the case, verify the maximum income subject to Social Security taxes for that year and compare it against your earnings record.
2. Signing up without understanding how your age affects your benefit
The federal government assigns everyone a full retirement age (FRA) based on their birth year. For today's workers, it's somewhere between 66 and 67. You must wait until this age to sign up for benefits if you want the full amount you've earned based on your work history, but many choose to sign up earlier or later than this.
Claiming early means more years of checks, but not everyone realizes that doing this shrinks your monthly benefit. Those who sign up as soon as they turn 62 only get 70% of their full benefit per check if their FRA is 67 or 75% if their FRA is 66.
You grow your checks by anywhere from five-twelfths of 1% to two-thirds of 1% per month for every month you delay Social Security until you reach your maximum benefit at 70. That's 124% of your full benefit per check if your FRA is 67 or 132% if your FRA is 66.
But when you delay Social Security, you receive fewer years of checks. Those with shorter life expectancies may not get as much out of the program by doing this. There are also those who can't afford to cover their expenses without Social Security. In these cases, signing up earlier can be the right move.
There's a calculator in your my Social Security account that can help you estimate your benefit at any age. Use this tool to estimate which starting age will give you the most money overall.
You can do this by multiplying your estimated monthly benefit by 12 to get your estimated annual benefit. Then, you can multiply this by the number of years you expect to claim. For example, an $1,800 monthly benefit claimed for 15 years would result in a lifetime benefit of $324,000. Compare your estimates for a few claiming ages to decide which is right for you.
3. Not coordinating with your spouse
Married people should go through the above process with their spouse to decide when each person will apply for Social Security. This is key to maximizing your household benefits.
If both partners earned a similar amount over their careers, each person may prefer to delay benefits as long as possible, unless they have a short life expectancy. But if one significantly outearned the other, it's more important for the higher earner to delay benefits if they're able to.
The lower earner might even choose to sign up early to help the couple with their bills until the higher earner is ready to apply. Then, once the higher earner signs up, the Social Security Administration will automatically switch the lower earner to a spousal benefit if that's worth more than what they're currently getting.
No one can tell you the best time to claim Social Security, because that depends on a lot of personal factors. But taking these steps is a good place to begin if you're unsure of when to apply. Repeat these steps every year or two, and make changes as necessary to keep yourself heading toward the retirement you want.
