Social Security seems to be pretty straightforward, but this can be deceiving. There are some specific tricks or areas you need to avoid, or consider, when it comes to maximizing your use of Social Security. Often times we assume we understand things, like Social Security, only to find out we don’t know all the nuances and advantages. Hopefully we can help you out in this area…
Some mistakes that people make with Social Security are more serious than others. However, if you can avoid making them in the first place, you’ll spare yourself (and your spouse) a lot of grief. Here are a few valuable tips from the Independent Record, as reported in the article “Don’t Make These 4 Big Social Security Mistakes”
There are four main areas that you should be aware of so you can maximize your Social Security benefits and stay current with what they are offering.
First, check the “use by” date on your strategy. There have been many changes to tax laws and Social Security regulations over the past few years. Having access to the entire world on the web is great, but only if it is current. Be cautious about using and following advice that came from too far back— such as the file-and-suspend strategy. 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 grew until the worker lifted the suspension and started receiving payments. However, a law changed that took this tactic away for those who didn’t act before May 2016.
Second, failing to claim even after waiting to claim may not do you any good. The fundamental trade off with Social Security is whether you should file early and get smaller monthly benefits or wait to file and the let your benefits get 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.
Third, 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 need to take into consideration. 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.
Fourth, 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. This can get complicated and different components can be more important to consider than others. This is definitely an area to get some outside expert advice from both your estate planning attorney and financial advisor. Meet with both of them before you make any decisions relating to your social security benefits.