“Social Security provides valuable benefits, and it's important not to waste the opportunity to get them. However, given just how complex it is to evaluate your Social Security benefits, it's not surprising that some people make mistakes.”
First, check the “use by” date on your strategy. There have been many changes to tax laws and Social Security regulations. Having access to the entire world on the web is great, but if the advice you are following came from too far back— such as the file-and-suspend strategy—then you’re barking up a very old tree. This was a very popular strategy that involved a worker who would claim benefits and then suspend them. The spouse or other family members were eligible to claim benefits on the worker’s earnings record, while those benefits grow until the worker lifted the suspension and started receiving payments. However, a law changed that took this tactic away, if you didn’t act before May 2016.
Failing to claim even after waiting to claim may not do you any good. Here’s the fundamental trade off with Social Security: file early and monthly benefits are smaller. Wait to file and the benefits will be bigger. However, that does not go on forever. After a certain point, you’ll get the same benefit.
What gets a little confusing is that the date to file is different, based on the type of benefits you are claiming. For your own retirement benefits based on your own work history, delayed retirement credits are available until age 70. There’s no increase in monthly payments past that date.
For spousal benefits, however, the date is different. No delayed retirement credits apply to spousal benefits, so if you wait past your full retirement age (FRA), usually between 66-67, then you may be leaving money on the table. You might not be permitted to claim spousal benefits at full retirement age, if your spouse hasn’t filed for retirement benefits. However, if you are allowed to claim spousal benefits at FRA, then there’s no need to wait any longer.
Are your benefits all working together? This is where it gets complicated. When you have benefits both under your own work history and under a spouse’s work history, there are more moving parts. With spousal benefits, you can’t claim them without also claiming your own retirement benefits. You should, therefore, wait longer to file a claim, if doing so will help you get more benefits on your own work record due to delayed retirement credits.
But … if you are claiming survivor benefits because your spouse has died, there’s even more moving parts. You can claim retirement benefits or survivor benefits separately and don’t have to claim them both at the same time. Sometimes it makes the most sense to claim survivor benefits first, while you let your retirement benefit grow. In other cases, it makes more sense to claim your own benefits first and let your survivor benefits grow. You’ll want to be sure to coordinate them wisely to max out what you receive from Social Security.
Did you get divorced before the 10-year rule kicked in? If you’re contemplating a divorce, include Social Security in your calculations. If you were married for at least 10 years before divorcing, you can claim Social Security benefits on your ex-spouse’s work record. However, if you got divorced after nine years and 11 months, you can’t. If you remarry, you can’t make a claim on your ex’s work records.
These are four commonly made mistakes and knowing about them may help you from making some expensive and unnecessarily bad decisions.
Reference: Independent Record (Sep. 15, 2018) “Don’t Make These 4 Big Social Security Mistakes”