When you start getting near to retirement, you begin thinking more about Social Security benefits — how they work and what’s the best way to use them. For those approaching the end of their working time, important decisions need to be made. Last week, CNBC Retirement did a great piece on some of the most frequent mistakes people make when determining when to claim their benefits. Here are several of the most common missteps and how to avoid them.
Mistake 1: Hitting The Break Even Date Dead On
Americans appear to be a pessimistic bunch, at least according to their behavior at retirement age. A full 40% of Americans start drawing Social Security as soon as possible, currently at age 62. But the odds are that you’ll live longer than your retirement funds are willing to take you if you start drawing early. Rather than worrying about your personal longevity, it often makes better sense to focus on the longevity of your retirement savings.
Mistake 2: Failing To Consider Your Spouse
Social Security allows spouses to claim off the earnings record of their partner. If you’ve worked less than your spouse, claiming benefits based on their earnings could help you earn significantly more income in retirement. One potential pitfall can arise when the higher-earning spouse claims an early retirement benefit and then passes away shortly thereafter. This can negatively impact their spouse’s benefit moving forward as they’d be claiming a payment based on their now-reduced spouse’s benefit.
Mistake 3: Not Realizing Options Exist After Beginning Benefits Payments
Beginning to draw Social Security benefits isn’t a now and forever decision. For example, if you begin receiving reduced benefits at age 62 and have a change of heart, you have one year from the time you begin receiving payments to suspend them. The only catch is that you have to repay the entire benefits amount received in addition to any Medicaid premiums taken out of the Social Security benefits. If you can’t repay what you’ve already received, you can opt to suspend benefits from full retirement age of 66 to age 70. That allows you to accrue four additional years of retirement credit before finally beginning benefits at maximum retirement age.
Decisions on when and how to claim Social Security can be confusing. But taking time to research your options now and talking to those most familiar with your financial situation can help you make a sound decision. If you have questions, feel free to call us at (864) 836-3136 and we’ll schedule a time to talk.