12 Mistakes to Avoid When Claiming Social Security

Social Security is a huge help in retirement, but it's also easy to cost yourself benefits if you don't understand how it works. The program has a lot of rules, and they may not all apply to you, but it pays to familiarize yourself with the basic ones before you sign up. If you don't, you could make one of the 12 costly mistakes described below.

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Your earnings record shows how much income you've paid Social Security taxes on over the years, and it's what the government uses to calculate your Social Security benefit. Most of the time the information there is accurate because it comes from the IRS, but if you failed to notify your employer of a name change or you accidentally wrote your Social Security number incorrectly on your employment paperwork, your earnings record might be wrong.

You can view yours by creating a my Social Security account. Compare your income for every year with your tax documents to ensure everything is correct. If you notice an error, fill out a Request for Correction of Earnings Record form and submit this to the Social Security Administration along with proof of your real income.

You have to earn at least 40 credits in order to qualify for Social Security. One credit is equal to $1,510 in earnings in 2022, and you can earn a maximum of four credits per year. If you haven't worked long enough to earn 40 credits, you must do so before you can claim any type of benefit based on your work history.

Whenever possible, work at least 35 years before signing up. The government bases your Social Security benefit on your average monthly income during your 35 highest-earning years. If you don't work at least this long, you'll have zero-income years factored in and this will reduce your monthly benefit.

Most seniors claim Social Security retirement benefits, but you might also be eligible for Supplemental Security Income (SSI) if you are blind, disabled, or have a low household income. This Benefit Eligibility Screening Tool can help you figure out if you qualify for these benefits.

If you have others in your household, like minor or disabled children who depend on your income, it's also a good idea to see whether they qualify for any benefits on your work record.

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You can claim Social Security as early as 62, but if you're trying to get the most out of the program and you expect to live into your 80s or beyond, it usually makes more sense to delay benefits.

Every month you delay increases your checks a little until you qualify for your maximum benefit at 70. If you do this, you'll get fewer checks, but each one will be larger. In the long run, you could end up with more money overall.

Delaying benefits isn't always the right decision. Those who have terminal illnesses or don't expect to live long are usually better off signing up for Social Security right away. Otherwise, they risk not getting anything from the program if they die before they can apply for benefits.

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It also doesn't make sense to delay Social Security if doing so will cause you to fall behind on your bills or rack up debt. Yes, delaying will earn you larger Social Security checks later, but this might not be enough to help you overcome these financial issues. Instead, claim Social Security when you need to so you can stay on top of your expenses.

The Social Security Administration can withhold some money from your checks if you claim benefits while you're still working if you're under your full retirement age (FRA). This is somewhere between 66 and 67, depending on your birth year.

You lose $1 for every $2 you earn over $19,560 if you'll be under your FRA for all of 2022. If you'll reach your FRA this year, you'll lose $1 for every $3 you earn over $51,960 if you reach this amount before your birthday. When you hit your FRA, the government will adjust your benefit to include the amounts it previously withheld and your future checks will be a little larger.

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Married people can either claim benefits on their own work record, if they qualify, or on their spouse's work record. A spousal benefit is worth up to 50% of their partner's benefit. The Social Security Administration automatically gives you whichever of the two benefits is larger, though you can't claim a spousal benefit until your partner signs up.

It's a good idea for married couples to decide each person's starting age together so they can get the most out of the program. It might make sense for both to delay benefits as long as possible. Or you might prefer for one person to sign up early while the other delays for larger checks.

Delaying Social Security can help you grow your spousal benefit over time. But while you can continue growing your own benefits until 70, your spousal benefits max out at your FRA. There's no sense in delaying past this age to sign up unless you're not able to because your spouse hasn't applied yet.

You can claim spousal benefits based on your ex's work record in certain circumstances, but you may lose these benefits if you remarry before age 60 or 50 if you're disabled. However, if your new spouse is eligible for Social Security benefits, you can claim spousal benefits on their work record. And of course, you're eligible to claim benefits on your own work record at any time after you turn 62.

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You could owe taxes on some of your Social Security benefits depending on your income and tax filing status. It's sometimes possible to avoid them by reducing your withdrawals from your retirement accounts or sticking to Roth accounts as you approach the threshold for benefit taxation.

But this doesn't always work. You might have to get comfortable with the idea of paying these taxes and include them in your retirement budget.

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It would be great if Social Security could cover all of your living expenses in retirement, but this isn't going to happen for most people. That's why it's important to save plenty of money on your own to cover what Social Security doesn't.

You can use your my Social Security account to estimate your Social Security benefit at various starting ages. Do this before you sign up so you know what to expect. And if you're concerned about not having enough, consider delaying retirement or Social Security to balance your budget.

Keeping the above tips in mind can help you choose your ideal claiming age and maximize your benefit. But don't feel like your decision is set in stone. As your life changes, you can always alter your plan for Social Security. Just be sure to also make adjustments to your retirement savings plan as well so you have the money you need.

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