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For many retirees, social security benefits are the only thing that keeps them afloat.
Although your benefits are designed to replace only about 40% of your early retirement income, half of the baby boomers say they expect their benefits to be their main source of income, according to a survey conducted. by American Advisors Group, a leading reverse mortgage company. In addition, about 1 in 5 married couples rely on monthly checks for at least 90 percent of their income, the Social Security Administration (SSA) found.
Although it is not ideal to rely more on your benefits than you should have, if you are nearing retirement and your savings are scarce, you may not have the same benefits. 39 other choice. If this is the case, it is essential to maximize your monthly checks. And there are at least three ways to hurt your social security benefits without even realizing it.
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1. Do not work for 35 years
Before you can maximize your benefits, it is important to understand how they are calculated. The SSA will first take an average of your 35 most lucrative working years (called your indexed average monthly salary, or AIME), then apply a formula to it to take into account any changes in salary levels. general. The amount of your monthly benefit is then determined based on the result of this calculation.
The part of this calculation that you can control is the number of years of work. If you do not work for 35 years, zeros will be entered into your calculation, which will reduce your AIME. With a lower average income, you will see a lower basic benefit.
Even if you have worked for at least 35 years, you may want to continue a few more years if you can. Because your average is based on your highest earnings years and you probably earn a much higher salary near retirement than when you started your career, you can replace some of your years of earnings weaker by more recent years and more remunerative. . This results in a higher average income and a higher benefit amount.
You can also find out the amount of your future social security benefits by creating a mySocialSecurity account to view your statements online. These estimates are based on your actual earnings and give you a clear idea of what you will likely receive.
2. Do not claim at the right time
The basic benefit to which you are entitled assumes that you are claiming at the retirement age, ie 67 years for persons born in 1960 or later, or 66 or 66 years and a few months for persons born before 1960 If you apply before or after this age, your benefits will be affected.
You can start applying for social security as early as age 62, but you will receive smaller checks. In fact, if your FRA is 67, your benefits will be reduced by 30% if you claim to be 62 years old. But if you wait after your FRA to claim (up to 70 years old), you will receive a bonus amount in addition to your complete checks. Those whose FRA is 67 can expect to receive an additional 24% each month until they are 70 years old. Although you can wait after age 70 to apply, benefits will not continue to increase – so there is no financial incentive to do so.
Typically, these changes are permanent once you start claiming. If you change your mind after you start applying for benefits, you have a chance to reconsider your decision. You will need to do this within 12 months of your request, and you will also be required to reimburse any benefits already received.
At first glance, this may seem obvious: expect to ask for benefits as long as you can receive these big checks. But this is not always the case. For example, if you have health problems and do not expect to live that long, you could lose thousands of dollars in benefits by waiting longer before applying. On the other hand, if you plan to live long and do not think that your personal savings will last as long, waiting as long as you can to cash those big checks can generate more revenue each month for the rest of your life. life. life.
3. Not benefiting from spousal benefits
If you are married, you may be able to receive benefits based on your spouse's work history. For married people, you must be at least 62 years old to apply based on your spouse's file. In addition, you can not start receiving benefits until your spouse has started to apply. When you start applying, you can receive up to 50% of your spouse's total benefit amount.
Even if you are divorced, you can still claim compensation based on your ex-spouse's record if you have been married for at least 10 years and you are not married (although if your spouse remarries, you can always pretend to his record). You must be at least 62 years old, but in this case, you do not have to wait for your ex-spouse to apply before you can start receiving benefits, provided you have been divorcing for at least two years. In addition, whether you are married or divorced, if you claim benefits based on your spouse's record, your spouse's benefits will not be affected.
You can also claim spousal benefits even if you are entitled to benefits of your choice. The SSA will pay your benefits first, and then if you could receive more based on your spouse's record, you will receive an additional amount to make up the difference.
Finally, do not forget that all normal claims rules still apply here. Although you can claim as early as age 62, you will not receive the full amount to which you are entitled unless you wait for it to be claimed by your FRA.
Social security benefits can be complex and confusing, but it's important to understand how they work if you want to make the most of them. Especially if you do not think you have enough savings to last the rest of your life, maximizing your benefits can help you enjoy a more financially stable retirement.
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