These social security mistakes can ruin your retirement
These social security mistakes can ruin your retirement

These social security mistakes can ruin your retirement

Ideally, you would retire with a nice chunk of money in your IRA or 401 (k) plan. But still, there is a good chance that social security will provide a significant portion of your retirement income. So the last thing you want to do is cut these benefits unnecessarily. But if you fall victim to these three mistakes, it can end up happening – and your retirement may suffer as a result.

1. Not knowing your full retirement age

The monthly Social Security the benefit you are entitled to charge upon retirement is based on your personal earnings history. And you can claim that benefit in full when you reach full retirement age, or OFF.

FROM 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.

Some people claim social security without first knowing their FRA – and inadvertently reduce their benefits in the process. If you want to avoid that fate, be sure to learn your FRA in advance.

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Claim benefits at 62 because you are concerned that the program is running out of money

Although FRA is when you are entitled to your full monthly social security benefit, you can sign up as early as age 62. And you may be inclined to go this route in light of news that Social Security is experiencing its share of financial problems.

But one thing you should not do is rush to sign up for benefits at age 62 because you think the program is running out of money. It just does not happen.

What is is happening is that Social Security is on its way to depleting its trust funds in a little over a decade. Once that happens, performance cuts can be inevitable. But the program is not in danger of running out of money, primarily because it derives most of its revenue from payroll taxes. As long as we have a workforce, the program can continue to exist and pay benefits.

In the meantime, if you claim benefits before you reach OFF, they will be reduced to what is generally permanent. It’s a hit you might decide to take in return for getting your money faster. But do not let your fear of the disappearance of social security drive that decision.

Provided you need to claim benefits when you sign up for Medicare

Many older people sign up Medicare when they turn 65, as that is when eligibility begins. You may be inclined to sign up for Social Security at the same time. But make sure you do not have to.

It is more than possible to sign up for Medicare and wait to claim social security. And since FRA does not begin until after age 65, it may mean that you avoid a reduction in your monthly income if you wait to apply for benefits.

Now you may have heard that once you are on Medicare, your Part B premiums will be deducted from your Social Security benefits. And that is right. However, you can also pay these premiums directly if you have not yet applied for social security. It is not that Medicare does not take your money from another source, such as your bank account.

Social security can end up giving you a lot of retirement income, so it’s important to file strategically. It is also a good idea to avoid these mistakes as they can leave you with less income for the rest of your life.

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