In 2023, over 67 million Americans received Social Security benefits. And while retirees are encouraged to plan for Social Security being supplemental income, rather than a main income source in retirement, that doesn’t always work out to be the case. Many Americans depend on Social Security for survival and could not stop working without it.
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With Social Security benefits holding such weight later in life, it’s important to plan for them accordingly. Here are some of the biggest mistakes to avoid when claiming or planning for Social Security benefits, and what could cost you big.
One of the biggest factors in the amount of benefit you receive in your Social Security checks per month will be when you decide to start claiming benefits. The earliest you can claim benefits is age 62, and the latest is age 70. Should you claim at 62, you will receive roughly 30% less in your monthly check than you will if you claim benefits at 70. Although the overall amount of money you will receive during your lifetime will be more or less the same, it is important to remember that earlier claiming means slightly reduced checks. This is important to factor into budgets and overall quality of life when considering retirement. You do not want to be stuck in a position where you have retired, but are operating under the assumption of a larger check than is actually coming to you.
Another huge potential boost to your Social Security benefits can come by way of spousal benefits. If you were previously married, widowed or currently married and retired, it is possible you can boost your Social Security check by a considerable amount if you qualify for spousal benefits. There are, of course, conditional provisions, such as not having remarried and your spouse having made more than you over their working lifetime, but eligible retirees can add significantly to their monthly check.
The Supplemental Security Income program gives monthly payments to adults and children with a disability or blindness who have income and resources below specific financial limits. SSI payments are also made to people aged 65 and older without disabilities who meet the financial qualifications. SSI payments are paid out monthly, but usually on a different day than Social Security payments. SSI, if you are eligible, is a great way to add to monthly benefit income that you might not have thought of.
Many often overlook the fact that Social Security benefits could be subject to federal income tax. The amount you could potentially be taxed ultimately depends on your overall income levels. This could mean that if you are pulling tens of thousands of dollars every month from other investment sources like annuities, life insurance policies and brokerage accounts, your benefit could very likely get taxed like regular income.
A large amount of Americans rely on Social Security income for the overwhelming majority of their expenses. This can lead to problems down the road, especially during high-inflation years which are particularly difficult for those on a fixed income. Generations of any age will do well to make sure they are investing in retirement vehicles such as a 401(k) and IRA to help them retire comfortably.
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This article originally appeared on GOBankingRates.com: 5 Social Security Mistakes To Avoid in 2024
