Retirees Could Lose $150K Making Just 3 Social Security Errors
Social Security benefits can be a crucial aspect of nearly every retiree’s life, providing a significant financial safety net that allows the beneficiary to enjoy their golden years with security and safety. However, like any complicated bureaucratic system, the rules that govern the Social Security Administration’s (SSA) dispersal of benefits can be tricky and labyrinthine.
Without the proper knowledge, recipients can make mistakes that cost them thousands over the course of their retirement — or even hundreds of thousands.
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With that in mind, MoneyLion spoke to financial experts to discover what those biggest mistakes can be, and just how much they can cost you.
Not Knowing the Social Security Basics
The biggest mistake people make with regards to Social Security, according to American Financial Services president and CEO Jason Bernat, is not understanding how it works. He added that knowing the basics underpinning how Social Security works can make a difference of thousands of dollars.
“I believe most clients paying into Social Security should at least understand the 35-year calculation,” he said. “Social Security calculates retirement benefits using a worker's highest 35 years of earnings. Someone with fewer than 35 years gets zeros included in the calculation, while additional high-earning years can replace lower-earning years.
Claiming Benefits Too Early
Multiple experts noted that claiming benefits at the earliest possible age (62) can be a mistake.
“For someone whose full retirement age is 67, claiming at 62 can reduce the worker’s monthly retirement benefit by 30%,” said Bernat, who also stated that delaying benefits until the end of your 60s can increase how much you receive.
Kevin Shahnazari, CEO of the financial technology company Savvo, concurred, adding that “during a retirement spanning 20 to 30 years, the difference in benefits from delaying Social Security can be more than $100,000 depending on how you live.”
Not Understanding Spousal Benefits
A lack of general knowledge of how spousal benefits work can be detrimental to married couples, according to Bernat, as the higher earner's decision of when to claim can not only affect their lifetime income, but that of their surviving spouse.
"A surviving spouse may receive as much as 100% of the deceased spouse's benefit, depending on claiming age and other factors," he explained. "A spouse can potentially receive a benefit based on the other spouse's record. The maximum spousal benefit is generally 50% of the worker's full-retirement-age benefit, not 50% of a benefit increased by delayed retirement credits.”
Shahnazari added that, in effect, the entire household suffers and can end up losing more money than they should by simpy not coordinating their Social Security claiming strategy in everyone's best interest.
The Bottom Line
“All of these mistakes put together can cost retirees more than $150,000 in lifetime Social Security benefits,” Shahnazari concluded.
Losing over $100,000 in Social Security benefits due to simple misunderstandings and Social Security mismanagement would be a devastating unforced error in one’s retirement — as the American economy becomes more unpredictable, and inflation and cost-of-living continues to rise, every dollar counts.
Don’t weaken your retirement by six-figure sums due to a few Social Security mistakes on your part. Instead, do your research, consult experts and make sure you get the financial fullest from your golden years.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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