Social Security provided benefits to nearly 70 million Americans in 2019 and 2020, and is the government’s largest welfare program.
Every taxpayer contributes to social security while working, and retirees depend on this money to supplement their retirement.
Social Security payments are adjusted each year to keep up with prices, but this year inflation exceeded cost-of-living adjustments, raising concerns about the financial security of seniors.
If you are not yet at retirement age, there are steps you can take that will have a serious impact on your post-retirement income.
As you plan to retire and claim Social Security, avoid these three mistakes that could cost you thousands in retirement.
1. Not keeping an eye on your income
Social Security payments are based on the money you’ve earned during your career, up to a point.
Your retirement benefits are calculated using your average income over your 35 highest earning years, up to an annual cap of $147.00 for 2022.
Even small increases in your average income can pay big dividends over time.
For example, a 65-year-old who earned $50,000 a year during his career would be eligible for a monthly benefit of $1,897 if he retired today.
A 65-year-old man who earned an average of $55,000 could, however, receive $2,029 a month, according to Bankrate’s retirement calculator.
This difference adds up to $1,584 each year, or about $40,000 during your retirement.
Ask for a raise at work, take a little hustle, or look for a new job if you think you can find a higher salary – it pays off in the long run.
2. Claiming too early
Social Security benefits are not only based on your income, but also on the age at which you start claiming payments.
You can start receiving benefits any time after you turn 62, but you have to wait a few years if you can afford it.
Claiming at age 62 could result in a 30% reduction in benefits, according to the Social Security Administration.
If you apply for full retirement age, which varies according to your date of birth, you will receive your full benefits.
You can also choose to defer benefits until age 70, which means you’ll earn deferred retirement credits that will increase your benefits by up to 32%.
According to Bankrate, a retiree earning $50,000 a year would receive:
- $1,577 per month if they retire at age 62
- $2,103 per month if they retire at age 66
- $2,683 per month if they retire at age 70
At age 85, at this rate, a pre-retiree would have received $47,688 less than if he had waited until age 70 to claim instead of 62, despite the eight-year advance.
However, there is no benefit to delaying beyond age 70.
3. Not claiming spousal benefits
If your spouse receives his or her own Social Security retirement funds, you may receive spousal benefits.
This option will usually result in more money if your partner has earned more income than you.
Spousal benefits are available for married couples and couples divorced after at least 10 years of marriage
You can receive a monthly payment of up to half the amount of their retirement benefits.
These payments will not reduce the amount of the primary earner’s retirement benefit.
Applying for spousal benefits can also help you earn income until you reach full retirement age if you are the younger spouse.
The Sun spoke with Professor Laurence J. Kotlikoff about ways to maximize your Social Security benefits.
We also reveal the four things to know about Social Security tax and the five things you need to do before claiming Social Security.
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