3 Painful Social Security Mistakes You Can’t Afford To Make
3 Painful Social Security Mistakes You Can’t Afford To Make

3 Painful Social Security Mistakes You Can’t Afford To Make

Ideally, you save enough for retirement so you are able to start your senior years with a nest egg of decent size. But even if that is the case, you can end up relying heavily on social security when you stop getting a paycheck home from work.

That’s why it’s important to squeeze as much money out of you as you can Social Security. But if you make these mistakes, you may instead lose money – and be forced to make some difficult choices at a time in life when you would rather not deal with financial stress.

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1. Not knowing your full retirement age

Social security does not pay a universal benefit. Yours depends on the salary you have earned during your 35 highest paid years in the workforce.

In the meantime, you are entitled to your full monthly benefit based on your earnings history when you reach full retirement age, or OFF. That age is not universal either. Rather, it depends on your year of birth, as follows:

Year of birth

Full retirement age

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 or later

67

Data source: Social Security Administration. Diagram by author.

If you sign up for benefits before OFF, they will be reduced on a permanent basis. So one of the biggest social security mistakes you can make is not knowing your specific FRA in the first place. If you mistakenly think FRA is 66 when it really is 67, you could end up with a lower benefit for life.

2. Provided that your monthly benefit will be increased if you apply early

Age 62 is the earliest age to enroll in social security. But as just mentioned, claims for benefits prior to FRA will reduce them in the process.

You can assume that if you apply for social security early, your monthly benefit will be restored to its full amount when FRA takes effect. But that’s not how things work. If you apply early and lock in a lower benefit, the reduced benefit is what you are stuck with forever.

The only exception is if you regret your application within a year, which requires you to repay every dollar you received in Social Security. Since many seniors are unable to meet that requirement, they are stuck with a lower benefit throughout retirement.

Postponement of your application after 70 years

Demanding social security early will shrink your benefits, however delay your submission former FRA will do the opposite. For every year you endure, your benefits will get a boost of 8% – a boost that stays in effect for the rest of your life.

But that incentive only lasts up to 70 years. Once you reach that age, there is no point in delaying your application anymore. And if you wait too long to sign up for Social Security after 70 years, you may miss out on income that you would otherwise be entitled to.

There is a good chance that you will become dependent on social security to some extent in retirement – and possibly a very large one. That is why it is so important to know the rules of the program inside and out. Arming yourself with information can prevent you from making a terrible mistake – one that costs you money and ruins your finances for many years.


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