Five Retirement Mistakes You Can't Afford to Make: Mistake #1
Mistake #1: Not Maximizing Social Security
Social Security may not make up a majority of your retirement income, but it almost certainly makes up an important part of it. In an era when few people still receive a guaranteed pension from their job, Social Security benefits may be the only source of income that a retiree is guaranteed never to outlive. Additionally, regular cost of living adjustments help to preserve the buying power of the social security dollars you receive.
When should you claim your Social Security benefit? The answer is a very firm, “it depends.” While many of the more aggressive claiming strategies were eliminated in recent years, it still pays to do a thorough analysis before making your decision. Generally speaking, many people would be well served to wait longer than they do. For each additional year that you wait to file between “Full Retirement Age” and age 70 when the benefit stops increasing, you receive an 8% increase in monthly. Can you think of another investment that guarantees you an 8% return each year, and is backed by the United States Government?
Importantly, this maximum benefit is also what will determine your survivor benefit. When one spouse dies, the surviving spouse will receive the greater of their own benefit, or the benefit of their deceased spouse. It pays for the spouse with the higher benefit to wait!
What if you need the extra income before you turn 70? That’s OK. With careful advanced planning, you may find it is in your best interest to spend some of your savings in order to wait for the higher income later!
Of course if you believe that you will have a shorter than average life expectancy, it may actually pay to claim your benefit early. That’s why it is so important to actually sit down and strategize about your claiming strategy before you make your decision.
