Ideally, you’ll save enough for retirement so that you’re able to kick off your senior years with a decent-sized nest egg. But even if that’s the case, you could end up relying heavily on Social Security once you stop bringing home a paycheck from work.
That’s why it’s important to squeeze as much money as you can out of Social Security. But if you make these mistakes, you could lose out on money instead — and be forced to make some tough choices at a time in life when you’d rather not deal with financial stress.
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Social Security doesn’t pay a universal benefit. Yours is dependent on the wages you earned during your 35 highest-paid years in the workforce.
Meanwhile, you’re entitled to your full monthly benefit based on your earnings history once you reach full retirement age, or FRA. That age isn’t universal, either. Rather, it depends on your year of birth, as follows:
Year of Birth
Full Retirement Age
1943-1954
66
1955
66 and 2 months
1956
66 and 4 months
1957
66 and 6 months
1958
66 and 8 months
1959
66 and 10 months
1960 or later
67
Data source: Social Security Administration. Chart by Author.
If you sign up for benefits before FRA, they’ll be reduced on a permanent basis. So one of the biggest Social Security mistakes you might make is not knowing your specific FRA in the first place. If you mistakenly think FRA is 66 when it’s really 67, you could end up with a lower benefit for life.
Age 62 is the earliest age to sign up for Social Security. But as just mentioned, claiming benefits ahead of FRA will reduce them in the process.
You might assume that if you file for Social Security early, your monthly benefit will be restored to its full amount once FRA kicks in. But that’s not how things work. If you file early and lock in a lower benefit, that reduced benefit is what you’re stuck with forever.
The only exception is if you undo your filing within a year, which requires you to repay every dollar you received in Social Security. Since many seniors can’t meet that requirement, they get stuck with a lower benefit throughout retirement.
Claiming Social Security early will shrink your benefits, but delaying your filing past FRA will do the opposite. For each year you hold off, your benefits will get an 8% boost — one that remains in effect for the rest of your life.
But that incentive only lasts until age 70. Once you reach that age, there’s no sense in delaying your filing any longer. And if you wait too long to sign up for Social Security beyond age 70, you could miss out on income you’d otherwise be entitled to.
There’s a good chance you’ll become reliant on Social Security to some degree in retirement — and possibly a very large one. That’s why it’s so important to know the program’s rules inside and out. Arming yourself with information could prevent you from making a terrible mistake — one that costs you money and wrecks your finances for many years.
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