The 3 Biggest Social Security Mistakes People Make
Social Security plays a vital role in every American's financial planning. It provides much-needed income in retirement that lasts the rest of your life, and it can also ensure that your spouse and certain other family members get the financial support they need. Because Social Security is a complicated program, it's easy to make mistakes about how best to get the most out of the program. Financial planners often hear the following three misconceptions about Social Security, and the mistakes that result from these erroneous beliefs can be costly. Knowing how to avoid them will make a big difference to how financially secure you are after you retire.
You can claim Social Security as early as age 62, but the earlier you take your benefits, the smaller your monthly checks are. For most of those born between the early 1940s and mid-1950s, claiming at 62 resulted in a 25% smaller retirement benefit than waiting until full retirement age of 66. If you could afford to wait still longer until age 70, you could boost your benefit an additional 32%. The net result is a nearly 75% increase by waiting the full eight years. Put another way, early filers build up an early lead in the amount of benefits they receive, but late filers start catching up as soon as they claim their benefits. If they live long enough -- typically between their late 70s and early 80s -- then they pass up their earlier-filing peers.
Many people claim Social Security early because they're convinced the odds of outliving their life expectancies are against them. But that mistake is based on two misconceptions. First, the typical 62-year-old man lives for 20 more years, while a woman of the same age typically can expect to live 23 more years. More importantly, your claiming decision can have an impact not just on your own retirement benefits but also on the amount of survivor benefits that a spouse or other family members might receive. It pays to run all the numbers before making a decision that you and your loved ones might regret later.
Source: Fool.com
