What Social Security Mistakes Could Reduce Your Retirement Benefits

Picture of social security benefits

Social Security will be an important benefit for your retirement plans. As a typical American, it will likely be the foundation of your income in your golden years. Social Security often makes up around 33% of an elderly American’s income. However, many Americans do not fully understand how these benefits work and what the program does for you. If you go into this process unaware, you could fall into some pretty common financial traps. Falling for these traps could permanently reduce your income later on.

3 Mistakes You Should Avoid When Applying for Social Security

  1. Claiming benefits before you know how they work. If you do not understand what could impact your Social Security income, you may make poor decisions when attempting to claim benefits. You need to know how your age, work history, and marital status will affect your benefits. For example, retiring before full retirement age (FRA) will reduce your monthly income. Working for less than 35 years will also decrease your benefits. Are you married, divorce or widowed? You may be able to claim benefits based on your spouse’s employment record.
  2. Depending on the Social Security Administration (SSA) to help you understand your benefits. Sometimes the SSA gives bad advice when people ask when and how they should claim their benefits. SSA employees have no guidelines to help them determine if someone is better off waiting to claim their benefits. They are also not trained as financial advisors, so they will not fully understand your situation. This keeps employees of the SSA from giving quality financial advice.
  3. Not applying for Social Security Disability during early retirement. Health concerns that make it impossible to work may encourage some to retire early. However, these individuals may want to consider applying for Social Security Disability instead. This option has many benefits. For example:
    • You will collect Social Security Disability Insurance (SSDI) instead of your retirement benefits.
    • You will not decrease your income by claiming retirement benefits early.
    • SSDI benefits also guarantee that you’ll have a higher monthly income at full retirement age.
    • You may even qualify for a disability freeze, which permits the SSA to discount any low-earning years due to a disability.

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