Many Americans are 100% reliant on Social Security payments as their only source of income during retirement. But even if you’ll have other income sources, it’s still incredibly important to maximize how much Social Security pays you.
Many different factors determine how much you’ll be paid once you retire. While many of them are outside of your control, there are a few serious mistakes that you should avoid to ensure you don’t unnecessarily cause yourself to lose out on money you would otherwise have been paid.
Here are the 3 most important Social Security mistakes to avoid at all costs…
Not Claiming the Full Amount You’re Entitled To
There are several different types of Social Security benefits, aside from basic retirement benefits. For example, you may be eligible for divorce benefits, survivors’ benefits, or spousal benefits in addition to your standard Social Security retirement benefits.
Claiming these extra benefits can result in you getting paid a significant amount extra each month, which can greatly improve the standard of living you can enjoy in retirement.
And, because you won’t automatically be notified if you’re eligible to receive any of these other benefits, it’s very important that you check for yourself to make sure you’re not leaving money on the table.
Claiming Social Security Too Early
It can often be tempting for retirees to start claiming Social Security as soon as they can, but this is rarely the best way to maximize your Social Security payouts over the course of retirement.
This is because the sooner you start claiming Social Security, the smaller your monthly paychecks will be throughout your retirement. Specifically, if you start claiming as soon as you’re entitled to, your monthly checks will be reduced by around 25 to 30 percent, which is far from a negligible amount of money foregone.
So, it’s advisable to wait a few years until you begin claiming Social Security unless you desperately could do with the money now.
Keep in mind that you’re eligible to start receiving Social Security benefits as soon as you turn 62, even though the full retirement age is 66 or 67, depending on when you were born.
Claiming Social Security Too Late
As just discussed, claiming too early can cost you a bundle of cash in retirement, but claiming too late is also something you should be wary of.
While it’s true that waiting until you reach the full age of retirement before you start claiming Social Security will mean you are paid more per month than if you were to start claiming as soon as you turned 62, it doesn’t necessarily mean you’ll be paid more in the long run.
For example, suppose you are suffering from a chronic illness, which reduces your life expectancy. In that case, it might be a good idea to start claiming benefits when you turn 62, as you’ll still earn more this way than if you were only to claim the full amount for a few years once you reach the full retirement age.
A Quick Summary
- There are many misconceptions surrounding Social Security payments – and making certain mistakes can cost you tens of thousands of dollars over the course of your retirement.
- Some of the most important mistakes to avoid are claiming too early, claiming too late, and not claiming all the money you’re entitled to.
- For the last point, you must check all the different types of benefits out there so you can determine if you’re eligible or not, as you won’t automatically be notified if you’re likely to be eligible.