Avoid These 3 Social Security Mistakes That Could Drain Your Savings
Social Security is an important source of income for many Americans in retirement. However, there are common mistakes that individuals make when it comes to their Social Security benefits that can end up costing them a significant amount of money over the years. Here are three Social Security mistakes that could potentially cost you a fortune if you’re not careful.
1. Claiming benefits too early
One of the biggest mistakes that individuals make when it comes to Social Security is claiming their benefits too early. While you can start claiming benefits as early as age 62, doing so will result in a reduced monthly benefit amount for the rest of your life. On the other hand, if you wait until your full retirement age (which varies based on the year you were born) or even delay claiming benefits until age 70, you can significantly increase the amount of your monthly benefit.
For example, if your full retirement age is 66 and you claim benefits at age 62, you will receive only 75% of your full benefit amount. However, if you wait until age 70 to claim benefits, you could receive up to 132% of your full benefit amount. By claiming benefits too early, you could be leaving thousands of dollars on the table over the course of your retirement.
2. Not factoring in spousal benefits
Another common mistake that individuals make is not considering spousal benefits when making decisions about their Social Security benefits. Spousal benefits allow one spouse to receive up to 50% of their partner’s full retirement benefit if their own benefit is lower. This can be especially beneficial for individuals who have stayed home to raise children or who have not worked enough to qualify for their own benefits.
By not factoring in spousal benefits, individuals could be missing out on valuable additional income in retirement. It’s important to consider all available benefits when making decisions about Social Security, including spousal benefits, to maximize your overall income in retirement.
3. Failing to account for taxes
Lastly, many individuals fail to account for taxes when planning for their Social Security benefits. Depending on your total income in retirement, a portion of your Social Security benefits may be subject to federal income tax. In some states, Social Security benefits may also be subject to state income tax.
Failing to plan for taxes can result in a lower net benefit amount than expected. It’s important to understand how Social Security benefits are taxed and to factor this into your overall retirement income planning to avoid any surprises come tax time.
In conclusion, Social Security is a valuable source of income in retirement, but there are common mistakes that individuals make that can cost them a fortune over the years. By avoiding these mistakes and carefully planning for your Social Security benefits, you can maximize your income in retirement and enjoy a more financially secure future.
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