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A hand holds a Social Security card
I guess I picked a bad title when I called my little guidebook “Social Security: Simple and Smart.” I’ll never attract readers and get rich with a boring title like that. Instead, I should have called it something like: “Buy This Book and Gets Thousands in Extra Social Security Benefits!” Or maybe, “Social Security Secrets That Will Make You Rich!”
I was thinking about this today while I was playing one of my little morning word games on my iPad. (My wife and I have this pre-breakfast routine where we play a few online puzzles and games before serving up our scrambled eggs or cereal.) And while playing one of my word games, this teasing headline popped up: “Social Security mistakes that could cost you a fortune!” Because I’ve seen hundreds, if not thousands, of these come-ons over the years, I knew the story would be trotting out the same tired old teasers that older adults have been hounded by for the past 10 years or so. It’s all part of the “maximize your Social Security” craze that’s been all the rage. I’ve spent countless past columns commenting on this hype. Here is my bottom-line message. There is nothing wrong with trying to get the biggest return on your Social Security “investment.” I just don’t like all the scare stories and catchy headlines that would lead seniors to believe they are missing out on a “fortune.” This latest pop-up ad listed “seven mistakes you should avoid to maximize your Social Security checks.” Let’s go over them.
Mistake No. 1: Taking benefits too soon
Surprise, surprise. This message is nothing new. For years now, senior citizens have been barraged with advice to wait as long as possible, preferably until age 70, before starting their Social Security benefits. I have written many columns on this topic, so I’m not going to reinvent the wheel here. Just know this. For every financial planner who tells me to encourage readers to wait until 70, I hear from another planner who tells me to advise readers to take benefits at full retirement age. Some might even be wise to take benefits at 62, as my wife and I did. You just need to gather all the facts, look at your other income sources, consider your health, lifestyle and family genetics, and make the best decision possible. And after you make your decision, don’t worry about it. Collect your Social Security benefits and enjoy life! Don’t let stories like this make you think you’ve missed out on a “fortune.”
Mistake No. 2: Claiming benefits while still working
This deals with the earnings penalty that applies to Social Security beneficiaries under full retirement age who are still working (usually part time). Calling this a “mistake that could cost you a fortune” is a big stretch. Almost all the people affected by this law are seniors working part time to supplement their Social Security checks and who try to keep their earnings under the prescribed yearly limit (currently $19,560.) So, taking benefits while still working part time is oftentimes a good strategy and certainly not a costly mistake for almost all these older adults.
Mistake No. 3: Not checking your earnings record
It is good advice to occasionally check your Social Security earnings record before you start claiming benefits. And the best way to do this is by checking the Social Security Statement that the government periodically sends you. My experience tells me most people religiously do this, so including it here as a “common mistake” is quite a stretch. And if you find an error (which is very uncommon), it’s relatively easy to fix it. And even in the unlikely event you didn’t fix it, the missing earnings, assuming it’s for a year or so, might knock a few bucks off your monthly benefit. Certainly not a “fortune.”
Mistake No. 4: Making an isolated decision
It seems to me this was just thrown in as filler for the article. The gist of their advice was to “consider all your other income sources before making a Social Security decision.” My comment on this: DUH!
Mistake No. 5: Failing to understand what qualifies you for Social Security
The message of this bit of advice is this quote from the article: “You don’t automatically just qualify for Social Security benefits when you retire. You have to meet certain eligibility requirements.” And then it goes on to point out that you have to work and pay taxes and earn a minimum of 40 “credits” or “quarters” to get Social Security. C’mon, folks! Is this really a common Social Security mistake that costs you a fortune? Unless you just landed here from the Planet Neptune, who doesn’t know that you have to work and pay taxes to get Social Security retirement benefits?
Mistake No. 6: Not knowing what Social Security rules are when it comes to divorce
Well, now finally, they hit on a real mistake that could possibly be avoided. They are talking about women (and it’s almost always women) not knowing that they have to be married for at least 10 years to qualify for benefits on the record of their ex-husband. I’ve run into more than a few women over the years who got a divorce somewhere shy of the 10-year mark. But here’s the deal. If you’re a 35-year-old woman who is getting a divorce from a bad or maybe even an abusive husband, potential Social Security benefits are the furthest thing from your mind. I’d suggest this. If you’re getting a divorce at the 9 year and 10-month mark, or something close to that, it might do you some good to hang onto the jerk for another two months. But if you’re dumping him after, let’s say, 7 years of marriage, do you want to stay hitched to his sorry butt for another three years on the off chance you might qualify for some of his Social Security someday?
Mistake No. 7: Not accounting for dependent benefits
And again, another bit of good advice. But frankly, there aren’t all that many retirees who have minor or disabled adult children at home. But if you do, it might make sense (assuming you meet all the other eligibility requirements) to take benefits as early as 62 because the extra money payable to the child(ren) could make up for the money you could lose by not waiting until a later age to claim benefits.
If you have a Social Security question, Tom
Margenau has a book with all the answers. It’s called “Social Security: Simple and Smart.” Contact him at thomas.margenau@comcast.net.