Some mistakes in life are more costly than others. Miss a sale on a TV you wanted to buy, for example, and you could end up paying $100 more for it, but make a mistake with Social Security, and it could cost you thousands of dollars throughout your life. retirement.
Here’s a look at some common mistakes people make when it comes to Social Security. Learn about them to avoid making them yourself.
Image source: Getty Images.
1. Assuming Social Security will provide more income than it will
Here’s a big mistake: Assuming that Social Security benefits will be generous. Such a belief can cause you to save less than necessary for your retirement. Here are some sobering facts: The average monthly Social Security benefit, in February 2023, was just $1,831, or about $22,000 for the year. These days, even if you’re married in retirement and bringing home $22,000 each, that’s probably far from what you need.
It’s true that if you’ve had an above average income in your life, your social security benefits will also be above average, but they still won’t be. This a lot. The maximum monthly benefit was recently $4,555 — but very few people can claim it. Set up a my social security account on the Social Security Administration (SSA) website for a more accurate idea of what to expect.
2. Not checking your income history
While you are viewing your account on the SSA website, review your income history. The SSA keeps a record of your earnings throughout your working life and bases your benefits on that. If you spot any errors, it’s best to get them corrected as soon as possible, as it might be more difficult to prove your earnings correct several years down the line. (Also note that there is an income cap each year, so if you make a lot of money, the record can only show that you made that amount – which is $160,200 for 2023.)
3. Not knowing the full retirement age
It is also important to know your full retirement agewhich is the age at which you can start receiving the complete benefits to which you are entitled, based on your earnings history. It’s based on your date of birth:
year of birth | Full retirement age |
|---|---|
1937 or before | 65 |
1938 | 65 and 2 months |
1939 | 65 and 4 months |
1940 | 65 and 6 months |
1941 | 65 and 8 months |
1942 | 65 and 10 months |
1943-1954 | 66 |
1955 | 66 and 2 months |
1956 | 66 and 4 months |
1957 | 66 and 6 months |
1958 | 66 and 8 months |
1959 | 66 and 10 months |
1960 and after | 67 |
Source: Social Security Administration.
4. Not planning when you will claim your benefits
You need to know your full retirement age, as you are allowed to start receiving benefits before and after – from age 62 and up to age 70. An early departure will reduce your checks and a late departure will increase them. (Remember, though, that starting your benefits early means you’ll get a lot more checks than if you had delayed, so starting early isn’t as harmful as you might think.)
Still, those who are able to delay should consider doing so, especially if they have a decent chance of living a longer than average life. Check the table below to see how much of your full benefits you can expect to collect, depending on when you start rolling checks:
Start collecting at: | Full pension at age 66 | Full pension at age 67 |
|---|---|---|
62 | 75% | 70% |
63 | 80% | 75% |
64 | 86.7% | 80% |
65 | 93.3% | 86.7% |
66 | 100% | 93.3% |
67 | 108% | 100% |
68 | 116% | 108% |
69 | 124% | 116% |
70 | 132% | 124% |
Source: Social Security Administration.
So ask the question of when to start receiving social security some thought.
5. Assuming Social Security won’t be there when you need it
Finally, don’t let sensationalized headlines in the media lead you to assume that Social Security is going to shut down soon. It’s not. He East However, over the decades, the ratio of workers paying into the system and recipients taking money from the system has declined, largely because people are living longer and retiring earlier.
Thus, it appears that the surplus drawn by Social Security will dry up within ten years, and if nothing is done, beneficiaries could only receive around 77% of the benefits due to them. Don’t panic, however, because there is still plenty of time for Congress to rectify the problem, using one or more of many possible solutions.
The more you learn about Social Security, the more intelligent decisions you’ll make about it and the fewer costly mistakes you’ll make.