Here are some common mistakes people make regarding Social Security. If you have more questions or concerns, please call or email Edward Crowe at 203-796-5403 or email at [email protected]
1. Waiting past age 66 to file
Even if you don’t intend to collect benefits until after age 66, don’t forget to file by the time you reach full retirement age. If you don’t wish to collect at that time, simply indicate that you want to suspend your benefits so they can keep growing.
Failing to file by 66 negates the possibility of earning a full lump-sum repayment if you later decide you’d rather have collected those suspended benefits (such as might occur if you suffer health problems in your late 60s). In that scenario, the lump-sum option will award you all you would have collected to that point at once, but this works only if you filed on time.
In addition, using a “file-and-suspend” strategy can also allow your spouse to begin collecting benefits while you continue working.
2. Waiting past age 70 to collect
There is a financial incentive for seniors to delay collecting Social Security past their full retirement age. For each year they wait, their benefits get a bump of between 5.5% and 8%. However, there are no additional benefits for waiting past age 70. At that point, any further delay in collecting simply means money lost.
3. Neglecting spousal benefits
Social Security offers several options for spousal benefits, so don’t miss this opportunity to bring in some extra cash if you or your spouse is eligible. For example, if you are collecting benefits and your spouse is at least 62 and isn’t collecting benefits, your spouse is eligible for a separate spousal benefit. The beauty of this arrangement is that it doesn’t diminish your benefits in any way.
4. Forgetting former spouses
After a divorce, the last thing you may want to remember is your former partner. However, if you were married to someone for 10 years and have been divorced for at least two, you are eligible to collect a spousal benefit from the relationship, provided both of you are eligible to collect benefits. However, this only works if you are unmarried when you file to collect.
In addition, when that former spouse dies, you can begin to collect his or her full level of benefits — just as you would with a current spouse.
5. Assuming you and your spouse should file at the same time
Filing for Social Security doesn’t have to be an all-or-nothing proposition for couples. In fact, using a so-called hybrid strategy can be an effective way to maximize Social Security benefits that the two of you receive. One spouse can file for benefits at a younger age while the other waits until later to maximize benefits.
6. Waiting too long to collect if you already have health problems
filing at age 62 is a common mistake, but it can be a smart move for those with serious or chronic health conditions. If you don’t reasonably expect to live into your 70s, filing early may increase your overall payout.
7. Dying without warning
Remember the bit about later applying for a lump-sum repayment if you deferred your benefits? It doesn’t work if you’re dead. That means your family will be left out in the cold on those deferred earnings if you don’t collect them before you die. While this sin is harder to avoid than the others, making sure to file by at least age 66 can help make you more prepared.