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Look 11 Social Security Mistakes That Can Cost You a Fortune Not what you think

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11 Social Security Mistakes That Can Cost You a Fortune Not what you think


Whether you're relying on Social Security to fund the bulk of your retirement income or to supplement it, you want to make sure you're getting all the money you're entitled to. However, with so many ways to claim benefits -- especially if you're married or married -- small mistakes can cost you big for the rest of your life.


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Mistake: Not checking your income records


Even if you're decades away from filing for Social Security, if you don't track your annual income, you could be making a big mistake. The amount of Social Security benefits you receive depends on your proof of income. Therefore, if this evidence is incorrect, you may not receive the benefits you are entitled to.

Errors can occur for a variety of reasons, including an incorrect amount of income reported by your employer, or your income not showing because you are married or divorced and your name change was not handled properly.


What to do: Check your Social Security statement at work


To avoid losing money due to errors in your income statement, review your statement annually. If you find an error, collect evidence of your income to send to the Social Security Administration, such as B. Your W-2 or pay stub. Once the Social Security Administration has verified your application, they will correct your records.

If your records are still handy than 10, 20 or more years ago, it's much easier to prove mistakes that happened the previous year because you probably don't have a written record that far.

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Mistake: Not working long enough


To receive Social Security retirement benefits, you need at least 40 work points. Depending on your income, you can earn up to four credits per year. In 2019, you must earn $1,360 to earn 1 credit, or $5,440 to earn up to 4 credits.

Additionally, your benefits are calculated based on your highest-earning 35-year average. If you have less than 35 years of income, for each year you have no income, calculate an average of $0.


What to do: Do ​​math before retirement


As you approach retirement, first check your income statement to make sure you have enough balance to get Social Security. If you don't have 35 years of income, consider whether working an extra year or two could increase your Social Security benefits.

For example, if your first occupation wasn't covered by Social Security, working another year or two could ensure you're eligible for Social Security benefits or increase your monthly benefit amount.


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Myth: Claiming Social Security Too Early


You can apply for Social Security benefits as soon as you turn 62. However, for those born after 1959, the benefit at age 62 is reduced by 30%. Lower benefits are permanent: your benefits do not increase when you reach full retirement age.


What to do: Wait longer before applying for benefits


Although you want to quit your job the day you qualify for Social Security, it may not be the best move financially. If you are in good health and anticipate long-term retirement, waiting in your later years to maximize your benefits may be critical.

If you can wait until full retirement age, your benefits may increase by as much as 8% each year you wait—until age 70.


Mistake: Waiting too long to apply for benefits


Even though your benefits will increase each month you wait to receive them, that doesn't mean it's best to wait as long as possible. In theory, if you reach your average life expectancy, it doesn't matter whether you receive benefits sooner or later. Because the decrease in revenue in the early use case and the increase in revenue in the later use case balance each other out.

But few are perfectly average. If you are in poor health, enlisting early can bring more benefits for the rest of your life. Also, if you're having trouble with cash, injecting your monthly benefit check at a young age can help you pay it off or avoid borrowing, which can ultimately save you money in the long run.


What to do: Consider your situation before applying for benefits


Don't think waiting until age 70 is best for your situation. Instead, you can run the numbers yourself or work with a financial advisor and consider your unique situation. For example, if you have a medical condition and don't want to live to be 75, let alone 80 or older, filing early will give you more benefits overall.

Whenever you decide to start claiming Social Security benefits, make sure you enroll in Medicare at age 65.

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Myth: Thinking only of your own strengths


If you apply for Social Security benefits to which you are entitled based solely on your proof of income, you may miss out on a significant benefit. This is especially important if you do not have enough work points to qualify based on your own proof of income.

For example, if you were a stay-at-home parent while your spouse was working, you may not have earned the minimum 40 work credits to qualify, or your benefits may be minimal. However, you are still eligible for Social Security benefits based on your spouse's work record.


What to do: Consider your spouse's proof of income


Before deciding how to apply for benefits, check how much you can receive against your spouse's employment record.

If you are divorced, if your marriage lasted at least 10 years, you are over 62 years old, you are unmarried, your ex-spouse is eligible for a Social Security pension or disability pension, and your earnings from your work Less than what you would get based on your ex's income records.


Mistake: Not Coordinating Benefits with Spouse


If you're married and you and your spouse are viewing your benefits in a vacuum, you may be missing out on strategies to maximize your combined retirement savings.

For example, if your spouse plans to claim benefits based on your Social Security income record, the spouse will not receive additional points for delaying claiming benefits past full retirement age.

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What to do: Coordinate your claims strategy


When you and your spouse develop your Social Security plan together, you can ensure that you maximize your comprehensive retirement benefits.

For example, a low-income spouse can begin claiming benefits based on the income of the high-income spouse at full retirement age. Meanwhile, higher-income spouses are deferring benefits to boost their pensions. This strategy can be difficult, so the cost of consulting a financial advisor is well worth it.


Mistake: No Taxes on Social Security Benefits


If you receive substantial outside income, such as wages or dividends, up to 85% of your Social Security benefits may be subject to federal income tax. The percentage of benefits you are subject to income tax depends on your combined income, which is adjusted gross income, any non-taxable interest income, and half of your Social Security benefits.

If you apply as an individual and your gross income is between $25,000 and $34,000, up to half of your benefits may be taxable. If your gross income exceeds $34,000, up to 85% of your benefits may be taxable. If your gross income is between $32,000 and $44,000, half of your benefits may be taxable. Taxable up to 85% if it exceeds $44,000.


How to do it: Proactively plan your taxes


Participating in tax planning can help ensure that you do not pay the IRS more than you must pay for Social Security benefits.

For example, if you plan to donate to a charity, consider making a qualifying charitable distribution to meet the minimum distribution you receive from your IRA, rather than using other funds. That way, distributions don't contribute to your taxable income and may result in more of your Social Security benefits being considered taxable income.


Mistake: Ignoring work rules for early benefits


If you plan to continue working after you start receiving Social Security benefits, you may find yourself in a poor financial position.

For every $2 you earn within the annual limit in the years before you reach full retirement age, your Social Security benefits will decrease by $1. In 2019, the annual limit for earners below full retirement age is $17,640.

In the year you reach full retirement age, your Social Security benefits will be reduced by $1 for every $3 you earn within that annual limit. In 2019, the annual limit for these earners was $46,920.


What to do: Budget for early retirement


If you rely on your early retirement Social Security benefits to supplement your employment income in the years you reach full retirement age, make sure you consider employment rules when you get Social Security. It is important to realize that your benefits may be reduced.

Once full retirement age is reached, there will be no further reduction. Your benefit amount will be recalculated at this point to ignore the months in which benefits were reduced or withheld due to the agreement. However, without proper planning, you may face liquidity problems in the short term.

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Mistake: Remarried without realizing how it will affect your benefits


Divorced seniors 62 and older can receive benefits for ex-spouse records, but only if they are unmarried. If you rely on your ex-spouse's benefits because you have low income or no job, you will lose the ability to receive your ex-spouse's benefits if you remarry.


What to do: Before you tie the knot, learn what it means


Marriage is sometimes as much about finances as it is about love, especially later in life. If you're struggling financially because you remarryed and missed out on your ex-spouse's Social Security benefits, take some time to determine if it's worth doing it for you.


Mistake: Waiting until age 70 to get spousal allowance


You are only entitled to a deferred pension credit if you are the primary beneficiary after you have deferred your benefits until full retirement age. The Social Security benefits you receive as a spouse do not include the deferred pension credit, so there is no incentive to defer Social Security beyond your full retirement age. If you wait, you will miss out on years that could have been collected.

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What to do: Retire at full retirement age for maximum spousal benefits


While as a spouse, you won't receive credit for deferring benefits past full retirement age, if you receive spousal benefits, you should plan to retire at your full retirement age to receive maximum benefits. When you reach full retirement age, you are entitled to 50% of your spousal benefit, which is the maximum.

If your full retirement age is 67, and you are already receiving spousal benefits at age 62, your benefits are only about 32.5% of your spouse's benefits.


Myth: Receiving social benefits can fully cover the cost of living


As of June 2019, the average monthly Social Security benefit for retirees was $1,471 per month. While it may be possible to live off Social Security alone in some cases, it may be necessary to drastically reduce your lifestyle. For many, however, living entirely on Social Security benefits may not be feasible. If you're going to live on Social Security alone -- and then you can't -- you're putting yourself at risk for financial problems.


What to do: Create a thoughtful financial plan before retirement


Social Security can be a great addition to other retirement income sources, but it shouldn't be your only source. Make sure you have healthy savings in your 401(k) or IRA, and ideally be prepared for passive income streams that will continue to pay off throughout your 9- to 5-year-olds.


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