Social security is a guaranteed source of income for retirees. It can lighten your personal retirement savings by allowing you to stretch your budget. However, the amount you receive depends on a number of factors, including when you start claiming benefits and how much you earned during your years in the labor market. It is important to understand how these elements fit together or you could make a mistake that will cost you tens of thousands of dollars in social security benefits during your lifetime. Here are three great social security missteps that you do not want to do.
1. Work under 35 years
Your social security benefit is based on your average monthly income during your 35 highest earning years, with adjustments for inflation. If you have not worked for at least 35 years, the Social Security Administration (SSA) will add zeros to your calculations, which will reduce the amount to which you are entitled. If you have worked less than 10 years, you may not qualify at all for Social Security pension benefits.
It should be noted that these years do not have to be consecutive. The SSA uses a credit-based system to determine eligibility for social security. In 2019, you earn one credit for every $ 1,360, with a maximum of four credits per year. You need 40 credits (10 years) to qualify for Social Security.
2. Do not check your income
Everyone should create a My Social Security account with the SSA. This will give you an idea of what to expect from social security if you start taking it at different ages. You will also be able to consult a copy of your salary statement. It is important that you check this information every year to make sure that it is accurate because that is what your warranty is based on.
If the SSA contains incorrect information, it could underestimate your average monthly earnings, which means your check will be less than you deserve. You can not do anything about it either, unless you have tax documents that prove your real salary. That is why you should not throw out all your tax papers unless you are certain that the government will record your exact income for this year. If you find an error, fill out an income correction claim form and submit it to the SSA, then check your social security account to make sure it is updated.
3. Claim social security too soon
It may be logical to claim Social Security early if you have a terminal illness or if you can not survive without the money, but if you plan to live long enough, it's usually not in your life. interest to start claiming as soon as possible. You are eligible for 62 years. You are only entitled to full benefits by check when you reach retirement age, which is currently 66 or 67, depending on your date of birth. Your checks will decrease for each month you receive benefits before that age. If you start at age 62, you will only receive 70% of the scheduled benefit if your retirement age is 67, or 75% if your retirement age is 66.
But it also works in the other way. You can delay retirement benefits beyond your retirement age and your checks will increase each month you wait until you reach your maximum benefit at age 70. This corresponds to 124% of your expected benefit if you reach the age of retirement at age 67 your retirement age is 66.
It's hard to know the best age to start social security because you never know how long you will live. But you can estimate how much you would get if you debuted at different ages. First, estimate your life expectancy based on your personal and family medical history. If in doubt, it is best to be on the high side. According to the SSA, a 65-year-old will live more than 90 years today and more than 95 years old.
Then, use your benefit estimates in your social security account to help determine how much you would receive each month if you started at different ages. Multiply each of these amounts by 12 to get your estimated annual benefits, then multiply these numbers by the number of years you plan to receive from Social Security to receive your estimated lifetime benefits. For example, if you plan to live to age 87 and you are entitled to $ 1,000 per month at retirement age, you multiply the $ 1,000 by 12 to get an annual profit of 12 $ 1,000, then multiply that amount by 20 years to get an estimated lifetime benefit of $ 240,000.
Social security does not cover all of your retirement expenses, but it may provide some relief for your personal retirement savings, especially if you avoid the above mistakes.