Avoid These Costly Social Security Mistakes

The result can be a bigger monthly benefits check in retirement.

Social Security will probably represent a big part of your retirement income. Your benefits will be adjusted annually for inflation and will last as long as you do. But getting the most out of Social Security involves more than filing for benefits. The rules are complicated, and an error could cost you thousands of dollars.

One common mistake is to use the wrong retirement age when deciding when to file for benefits. Many people think that they’ll be eligible for full benefits at age 65, but that’s not always the case. If you were born between 1943 and 1954, your full retirement age is 66. Starting with those born in 1955, full retirement age will gradually rise in two-month increments to age 67 for people born in 1960 or later.

Why is this important? Once you reach full retirement age, you can claim your full Social Security benefit. Claim earlier and your benefits will be reduced. In addition, once you reach full retirement age you can earn as much as you want without forfeiting some of your Social Security benefits.

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A second mistake is to ignore how filing for benefits will affect your spouse. There are several things married couples can do to increase their combined benefits. For these strategies to work, you must coordinate the timing of your claims. For example, the higher earner could delay filing a claim until age 70. Meanwhile, the other spouse could claim a spousal benefit, providing some income in the meantime. If you’re the higher earner, the timing of your claim could also have a big impact on the amount of benefits your spouse will receive if you die first.

Finally, if you filed at 62 and now regret it, don’t overlook the possibility of a do-over. You can withdraw your application within 12 months of the date you filed, pay back your benefits, and restart at a higher amount later. If you’ve already passed the 12-month mark, you still have options. Once you reach full retirement age, you can voluntarily suspend your benefit. You’ll earn delayed retirement credits until you start claiming benefits again.

This is just the tip of the iceberg. There are many more costly Social Security mistakes that you need to avoid in order to maximize your retirement benefits.

Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.