Don't Make This Social Security Mistake in 2016

Image: Herman Yung, Flickr.

Social Security provides 50% or more of the income of 53% of elderly married couples and 74% of elderly single people. It provides a whopping 90% or more of income for nearly half of elderly single people and more than 20% of elderly married couples. Clearly, it's a critical source of funds for many people and you're smart to give it some thought before it's time to start collecting. After all, making certain mistakes with Social Security could cost you thousands.

For 2016 and beyond, what's the worst Social Security mistake you could make? A top contender would be this: focusing too much on when to start collecting and too little on other important concerns.

When to start
When to start collecting Social Security is a meaningful decision. You can do well to just start collecting at your "full" retirement age, which is 67 for those born in 1960 or later, 65 for those born in 1937  or earlier, and somewhere in between for those born between 1937 and 1960. But you have more options than that.

You can start collecting Social Security benefits as early as age 62 and as late as age 70, with benefits shrinking or growing for every year before or after our "full" retirement age. For every year after your full retirement age that you delay starting to collect, your ultimate monthly check will grow by about 8%, giving you the chance to boost your ultimate checks by about 24%. On the other hand, if you start collecting at age 62, you can expect your checks to be about 30% smaller.

That can make it seem well worth it to delay, but it's not quite as worth it as you probably think. The Social Security Administration (SSA) explains : "If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between." That makes sense once you realize that though checks that begin at age 62 will be substantially smaller than checks that begin at age 70, you will receive them for 96 more months!

If you expect to live a longer-than-average life and you can afford to delay starting to collect, go ahead and do so. But don't fret too much if you need to start collecting closer to age 62. It's likely that your lifetime benefits won't be too much smaller. And besides, there are more important Social Security issues to consider and mistakes to avoid.

Don't neglect spousal strategies. Photo: Adam Butler, Flickr.

A bigger mistake to avoid: neglecting your spouse
One terrible Social Security mistake to make, if you're married, is to fail to have a coordinated strategy. You can collect thousands more from Social Security by employing some smart spousal strategies -- especially if there's a great disparity in the earnings history of the two spouses or a great difference in ages.

For example, if two spouses are collecting benefits and one dies, the surviving spouse can collect the higher of the two benefit amounts. Thus, it can be smart for at least one spouse -- ideally the one who has been the bigger earner -- to delay collecting benefits in order to increase the size of their eventual checks. This can be especially valuable if one spouse earned a lot less in his or her working life than the other.

Meanwhile, many spouses are eligible for a spousal benefit, which can be as much as 50% of their partner's benefit. If you qualify for a spousal benefit, you can collect it while delaying starting your own benefits -- in order to let those grow. If you're divorced from someone you were married to for at least 10 years, you may be able to receive benefits based on your former spouse's earnings.

Maximize your earnings for maximum retirement benefits. Image: Miran Rijavec, Flickr.

A bigger mistake to avoid: not maximizing earnings
Another potentially costly mistake to avoid is not maximizing your earnings in order to maximize your ultimate Social Security checks. Know that the payments you receive are based on the 35 years in which you earned the most money. So if you quit working after having only worked 28 years, or even 34 years, you're leaving some future Social Security dollars on the table.

Note, too, that how much you earn during your working life matters. If there are ways for you to earn more in some years, such as via a second job or earning an extra promotion or two, that can give you more money in retirement. For context, know that the average Social Security retirement benefit was recently $1,338 per month, or about $16,000 per year, and the overall maximum monthly Social Security benefit for those retiring at their full retirement age was $2,663 in 2015 -- or about $32,000 for the whole year.

There's more to know about Social Security and there are many profitable strategies to consider. It may not be an exciting topic to study, but motivate yourself with the thought of fatter checks in retirement. Consider consulting a financial planning professional, too.