Source:fool.com (visit fool.com for more news)
By: Dan Caplinger
Sixty-seven is the new 65, with an increase in the full retirement age for Social Security slowly going into effect over the next several years. However, just because 67 will be the new full retirement age doesn’t mean that it’s always the best time for you to claim. There are several misconceptions about Social Security that can lead you to make a bad decision, and the three listed below are common ways that people miss out on extra benefits by thinking that waiting is always good. Make sure you’re not making any of these mistakes in considering your own decision on when to claim Social Security.
1. Thinking that your family can claim spousal or children’s benefits even if you wait
It used to be that if you wait until full retirement age to file for Social Security, you could then make a decision to suspend those benefits and still make it possible for your spouse and any eligible children to claim family benefits based on your work record. That changed, however, with the decision of the federal government to get rid of the ability to file and suspend.
Now, for your spouse or children to be able to receive any benefits they’re entitled to under your work history, you have to file for and actually receive retirement benefits. Because there’s no longer a file-and-suspend-related incentive to wait, many families find that the downside of giving up a larger monthly payment for your own retirement isn’t as large as the upside of letting your family claim benefits. If you have family members who will rely on your work record for Social Security, look closely to see if filing early might make more sense.
2. Missing out on getting your own benefits early and getting a larger survivor benefit later
Usually, claiming your own retirement benefit triggers any other benefits under Social Security you might have. For instance, if you’re entitled to spousal benefits and that amount would be larger than your own benefit, then filing for your retirement benefits automatically triggers the spousal benefits as well.
However, one area where that’s not the case is with survivor benefits. If you claim your own retirement benefits early but don’t take survivor benefits until full retirement age, then the survivor payouts won’t be subject to the same reduction as filing early for retirement benefits.
Therefore, one strategy to consider is claiming retirement benefits at 62 but allowing any survivor benefits to go untouched until you reach full retirement age. That way, you get the best of both worlds: immediately monthly income at 62 plus larger payouts later on in retirement. In some cases, if you don’t file for your retirement benefit early, you’re just missing out on four or more years of payments without any corresponding increase later on.
3. Thinking you have to start Social Security right when you retire from work
Some people mistakenly believe that they have to take Social Security when they stop working. With more people working longer, retiring at 67 is becoming more common, and the raising of the official full retirement age has only heightened that perception.
It’s true that taking Social Security while you’re still working can sometimes lead to your losing retirement benefits. However, the applicable income limits don’t snare every single worker who gets Social Security, especially if you ease into retirement by reducing hours or switching to a lower-stress job. For some, the added income from Social Security during the final years of your career can create more financial stability that in turn improves quality of life.
Waiting until 67 to take Social Security sometimes makes sense, but you should make sure your reasons for waiting are good. In some cases, waiting until 67 is actually a terrible move if you want to make the most of Social Security.
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