Social Security Mistakes PC1339-Print

RETIREMENT PLANNING

SOCIAL SECURITY

Avoid the Common Social Security Mistakes

According to the Social Security Administration, there are 8,000 claiming strategies available for couples and more than 2,700 separate rules on benefits. To say that understanding Social Security can be a challenge is an understatement.

Avoid the following common mistakes to get the most out of your Social Security benefits.

1. CLAIMING TOO EARLY The earliest you can claim Social Security benefits is age 62. However, full retirement age is 66 or 67, depending on the year you were born. Claiming benefits before your full retirement age means a permanent 25% reduction in your monthly benefit. Waiting longer can give you an extra 8% a year in delayed retirement credits up until age 70. If your full retirement age is 66 and you delay your claim until age 70, you will receive a 32% boost. 2. CLAIMING TOO LATE Life expectancy plays a role in maximizing your Social Security benefits. When estimating your longevity, you should consider your family history and overall health. While it is impossible to know exactly how long you will live, this exercise can provide valuable perspective on when and how to claim Social Security. 3. WORKING FEWER THAN 35 YEARS Your Social Security benefit is calculated using your top 35 years of earnings. If you have fewer than 35 years in your earnings record, those years where you don’t have earnings will factor in as zeros thereby bringing down your average earnings. You can replace those zeros with a year of earnings, regardless of what age you return to work. A year of part-time work can help boost your benefit. 4. PLANNING TO CLAIM BENEFITS AND WORK BEFORE FULL RETIREMENT AGE Your benefits will be reduced if you are younger than full retirement age and earn more than certain amounts. If you are younger than full retirement age and have claimed your benefits, and your earned income exceeds the threshold, the Social Security Administration can require you repay some of the benefits. * At full retirement age, however, you can earn as much as you want while taking benefits. 5. IGNORING TAXES Social Security benefits are subject to taxation. Up to 85% of your benefits can be taxed at your marginal tax bracket. Look at all of your income sources when determining where to draw income from in retirement, and

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