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Three Social Security Mistakes for You to Avoid

Three Social Security Mistakes for You to Avoid

This article was written by Eddie Holland, Sr. Private Wealth Advisor in the Greenville office of Ronald Blue Trust.

I have met with numerous clients who were on the verge of making a Social Security claiming mistake. Fortunately, they asked our opinion before deciding how to proceed, and we were able to advise them properly. However, not everyone has been so fortunate.

Can we all agree that Social Security claiming strategies are complex and sometimes very confusing? Although Social Security has garnered quite a bit of attention from financial “experts” and mainstream media alike over the past several years, I feel there is still a great deal of confusion among most people when it comes to the Social Security claiming strategies available to them.

Below are three Social Security claiming mistakes I have seen people make. Hopefully, you won’t make the same mistakes.

1. Taking your benefit early–In most cases, the earliest age you can begin drawing your Social Security (SS) benefit is age 62.  However, just because you can take your benefit at age 62 does not mean that you should.

Why? Because your benefit will be reduced by 25% (assuming you were born between 1943-1954). This can result in thousands of dollars of lost benefits over your lifetime. In addition, if you are the higher wage earner, your decision to take benefits early could impact not only you but also your spouse. If your spouse survives you and has a lower SS benefit, your spouse will be eligible to draw a survivor benefit.

In other words, at your death, your surviving spouse can begin drawing what you were drawing prior to your death. However, if you elected to take your SS benefit early, your surviving spouse could be locked into that lower amount for life, as well. So, before you decide to draw your benefit at the earliest possible date, consider that your decision could be costing your family thousands of dollars.

2. Not drawing a spousal benefit–If you are married and reach Full Retirement Age (FRA) having never drawn your own SS benefit, you have an option. You can elect to draw your benefit or delay receipt of your benefit. You may be aware that by delaying receipt of your benefit, the benefit will increase by 8% per year until you reach age 70 (the 8% is called “delayed retirement credits” or DRC).
What you may not be aware of is that you could restrict your benefit to spousal only, if eligible. As long as your spouse has filed for his/her own benefit (even if your spouse filed and suspended), you will be eligible to receive half of your spouse’s FRA benefit. The beauty is that your benefit continues to increase at 8% each year. It’s like having your cake and eating it too!

(Note: Due to the recent Social Security changes, in order to be eligible for a restricted claim, you must have turned 62 by January 1, 2016.)

3. Not drawing benefits after your divorce–If you are recently divorced or have been divorced for quite a while and never remarried, you may think you are not eligible for a SS benefit from your ex-spouse. You would be wrong . . . and that’s a good thing!

If your ex-spouse is still living, you could qualify for a spousal benefit off your ex-spouse’s Social Security record. To qualify, you must have been married for at least 10 years, be at least age 62 or older, and currently unmarried. This is the case even if your ex-spouse has remarried. Shocking, I know!

If your ex-spouse is deceased, you could be eligible for a survivor benefit off of your ex-spouse’s Social Security record, even if you have remarried (exceptions apply). To qualify, you must have been married for at least 10 years, be at least age 60 or older, and currently unmarried (or if you remarried, this remarriage must have occurred after you turned age 60).

The decision of when to claim Social Security benefits can be complex and multi-faceted. Our goal is not to make the decision for you but rather to make you aware of your options because one of the most dangerous decisions to make regarding Social Security benefits is the uninformed one.

If you need assistance and would like to talk to a Ronald Blue Trust advisor about your individual situation, please contact us at 800.987.2987 or email [email protected].

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