The Social Security Moves Most People Skip Before Filing – And What It Costs Them

Social Security is one of the most important benefits for
seniors. And if you don’t have money saved for retirement, you may find that
those monthly checks provide most or all of your income once you end your
career.

For this reason, it’s important to file for benefits at the right time, and to
make sure you’re getting the benefits you’re entitled to. But many seniors rush
into claiming Social Security without doing enough legwork ahead of time.

Here are some key things every retiree should do prior to claiming Social
Security, and why they’re so important.

Find Out: 13 moves seniors could benefit from but often forget about.

1. Make sure your earnings record is correct

The monthly benefit you’re paid by Social Security in retirement hinges on two
things – your filing age and your earnings history. But if the Social Security
Administration (SSA) has incorrect wage information on file for you, it could
result in smaller benefits.

Before you sign up for Social Security, you should create a my Social Security
account. What this lets you do is access your annual earnings statements,
which summarize your career wages.

If you see a year when wages are underreported, you can report that to the SSA. Simply find proof to back up your claim, like old tax returns, W-2s, or pay stubs, and then request a correction. Having a record of lower earnings replaced with higher earnings
could lead to larger benefit checks.

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2. Calculate the financial implications of different filing ages

The earliest age you can file for Social Security is 62. If you were born in
1960 or later, you’re eligible for your monthly benefits without a reduction at
age 67, which is full retirement age (FRA).

You can also delay Social Security past FRA for boosted checks. Each year you
wait gives your benefits an 8% increase until you reach age 70.

It’s important to know what monthly benefit you might get based on your filing
age. Once you create your Social Security account and look at your earnings
statements, you can see an estimate of your retirement benefit. From there, it’s
a matter of math.

Let’s say you’re looking at a $2,400 monthly benefit at an FRA of 67. If you
claim Social Security at 62, your monthly checks will be reduced by about 30%,
leaving you with $1,680 a month instead. On the other hand, if you claim Social
Security at 70, you’ll boost your monthly checks to $2,976.

Seeing the numbers in front of you could help you make a more informed decision.
For example, you may be eager to claim Social Security at 62 and get your money
as soon as possible. But when you see how much less income that leaves you with
compared to filing at age 67 or 70, it could make you change your mind.

3. Figure out your retirement income needs

It’s hard to know what Social Security filing age to choose without knowing how
much income you’ll need in retirement to cover your expenses. To that end, make
a list of your current bills. Then, try to figure out if any will change for the
better or for the worse in retirement.

Your transportation costs, for example, may go down if you’re not commuting on a
daily basis. On the other hand, if you only have one streaming service now, you
may need a second one to keep busy if you’ll be spending more time at home. Your
utility bills might also increase if you’re home during the day instead of at an
office. It’s important to have this information so you’ll know how much Social
Security you need.

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4. Coordinate with a spouse if you’re married

If you’re married and you and your spouse are each eligible for Social Security,
it’s a good idea to coordinate claims. You may decide to have the lower earner
file early or on time so those benefits start while the higher earner delays
past FRA for boosted checks. But if you rush into filing and don’t coordinate,
you could end up losing out on a higher household income.

It’s also important to discuss your filing strategies in the context of survivor
benefits. The lower earner in your household will be eligible to receive the
higher earner’s monthly benefit if the higher earner passes first. That could
make the case for the higher earner to delay their claim.

Bottom line

Rushing into Social Security is one of the biggest financial mistakes
you might make in the context of retirement planning. Even though you may be
inclined to file for benefits as soon as you can, it’s important to put a lot of
thought into your decision.

Social Security may end up paying you a monthly benefit for 20 years, 25 years,
or more. And even with money saved, those benefits might still constitute the
bulk of your retirement income. Going through this checklist could help you make
a more grounded filing decision so you don’t end up regretting your choice
later.

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