The monthly benefit you collect from Social Security could end up being crucial to your financial stability during retirement, so it's important to file for benefits strategically and set yourself up for as much income as possible. But these costly mistakes could result in less Social Security for you -- and a host of financial stress as a retiree.
1. Not knowing when you're entitled to your full monthly benefit
The monthly Social Security benefit you're entitled to as a retiree will hinge on what your wages looked like during your 35 most profitable years in the labor force. But you're not entitled to that complete monthly benefit until you reach full retirement age, or FRA.
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FRA hinges on your year of birth, and you can use this table to see what yours looks like:
|
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 any year after) |
67 |
Data source: Social Security Administration.
You're allowed to sign up for Social Security as early as age 62. But you won't get close to your full monthly benefit if you sign up at that point.
Furthermore, some people might get confused and assume that FRA is 65, since that's when Medicare eligibility begins. But FRA for Social Security doesn't start that early, so it's important to be aware of that. Filing for benefits before FRA will mean reducing them for life.
2. Not reviewing your annual earnings statements
The Social Security Administration (SSA) issues all workers an annual earnings statement. It will summarize your wages and give you an estimate of what your retirement benefit might look like.
Many people don't bother to look at their earnings statements. But you should study yours carefully because underreported income could result in a lower Social Security benefit for you down the line.
Accessing your earnings statement, meanwhile, is pretty easy. If you're not yet 60, just create an account on the SSA's website to get that document.
If you're 60 or older, your earnings statement should come in the mail. But you can still log into your Social Security account and get that information online.
3. Not discussing your filing options with your spouse
When you're married, it's important to sync up with your spouse on your Social Security filing, rather than make that decision solo. That's because your filing choices have the potential to impact your spouse's senior income.
Let's say you and your spouse agreed that you'd work full-time to support your family financially while they'd stay home and raise your children. It may be that your spouse isn't entitled to a Social Security benefit of their own, but rather, a spousal benefit.
That spousal benefit could be worth up to 50% of what you collect. So if you file for Social Security early and slash your benefit, your spouse could end up with a smaller benefit, too.
Similarly, once you pass away, your spouse will be entitled to survivors benefits. Those will equal 100% of your monthly benefit. But if you reduce that benefit with an early filing, it will leave your spouse with that much less income in your absence.
Social Security will likely play an important role in your retirement. Avoiding these mistakes could help you make the most of the program and score a benefit that does a better job of covering your needs.
