3 Social Security Mistakes That Could Derail Your Retirement

One of the most stressful decisions you might have to make in the context of your retirement is figuring out when to claim Social Security. And there’s a reason there’s so much pressure to get that decision right.

The monthly benefit you get from Social Security throughout retirement will hinge on a couple of things — your earnings history coupled with your filing age. So if you file at the wrong time, it could negatively impact your retirement finances.

With that in mind, here are three major Social Security blunders that could upend your retirement, so it’s best to avoid them at all costs.

1. Claiming benefits too early

You’re allowed to sign up for Social Security at any point once you turn 62. But you won’t get your complete monthly benefit based on your personal earnings history until you get to full retirement age (FRA). FRA is 67 for anyone born in 1960 or later.

If you’re looking at an FRA of 67 and you claim Social Security at 62, you’ll be reducing your monthly checks by about 30%. That may not be a problem if you have plenty of retirement savings to fall back on.

But if that’s not the case, and you’re planning to get a lot of your monthly income from Social Security, then a hit that large could prove very problematic. It could, in fact, leave you scrambling to pay your bills.

2. Taking benefits too early and not undoing your claim

You may rush into claiming Social Security at 62 only to regret that choice afterward. But doing nothing about it is a huge mistake, too.

Every Social Security recipient is allowed to undo their filing once in their lifetime. So if you signed up for benefits early and aren’t happy with your resulting monthly paychecks, you can undo your filing as long as you make that move within a year and repay all of the benefits Social Security paid you.

That’s a step worth taking if you’re worried that a reduced benefit for life will seriously compromise your ability to keep up with your bills.

3. Waiting too long to take benefits and shorting yourself on lifetime income

Just as claiming Social Security as early as possible can be a negative thing, so too can filing late be problematic. For each year you delay Social Security past FRA, your benefits get to grow 8%. And that incentive is available until you reach the age of 70.

The problem with signing up for Social Security at 70, though, is that while you may end up with a larger check each month, you could also wind up with less income from the program in your lifetime. Whether a delayed claim works out for you or not really depends on how long you end up living.

The tough thing, of course, is that that’s not something you can predict. But if your health is poor going into retirement, you may not want to delay Social Security past FRA. In fact, in that situation, claiming benefits early could actually work to your advantage.

A delayed claim might put more money in your pocket all-in if you live well into your 80s or beyond. If you only live until your mid-70s, it’ll probably mean losing out on lifetime income. So you’ll need to be honest with yourself and think carefully about the state of your health before choosing to delay Social Security, even though you might assume it’s a financially responsible move.