Social Security Mistakes

Social Security Mistakes


“Social Security income will be important to us in retirement. Therefore, we can’t afford to make any Social Security income mistakes.”

Social Security income is often an important part of retiree’s cash flow. Unfortunately, many retirees commonly make Social Security income planning mistakes which reduces their Social Security income. Here are the six Social Security income mistakes that we see most often.

1. Relying on Social Security income advice from the clerks in your Social Security office.

Social income planning is a highly complex subject. For example, according to Laurence Kotlikoff, Ph.D., Professor of Economics at Boston University, there are 1,728 Social Security rules that affect retirees. Since the clerks in Social Security offices have not been trained in these rules, the Social Security Administration tells their clerks to not give Social Security income advice to applicants. Unfortunately, many clerks continue to do so, often to the detriment of retirees.

2. Not understanding the Social Security income formula.

The formula that is used to compute Social Security retirement income is based on the 35 years in which retirees had their highest earnings (adjusted for inflation). Many people who have worked 35 years are now earning considerably more than when they first started working (on an inflation-adjusted basis). In these cases, continuing to work can be helpful, since each new higher-earning year replaces a lower-earning year in the Social Security income formula.

3. Not Correcting Social Security Errors.

At the end of each year, Social Security records your earnings; however, the amount that they record can be in error. If an earnings error is not corrected, you may receive less Social Security income than you are entitled to. Unfortunately, you only have 3 years, 3 months and 15 days from the date of the error to have it corrected.

4. Applying for Social Security too early.

The minimum age to elect Social Security benefits is age 62,   while the maximum age is 70. Taking Social Security early permanently reduces your Social Security lifetime income while postponing taking benefits permanently increases your Social Security lifetime income. The lifetime difference between taking Social Security income early vs. taking Social Security income later can amount to $250,000 or more.

5. Not understanding the divorce retirement income rules.

If you are divorced, you may be able to receive Social Security retirement income based on your ex-spouse’s earnings record (and he or she does not have to know about it or even agree to it). To collect divorce retirement income, your marriage had to have lasted 10 years or more; your ex-spouse has to be eligible for Social Security benefits (even if he or she has not yet filed for benefits); you must be unmarried; and, you must be age 62 or older.

6. Not realizing that Medicare Part B premiums are deducted from your Social Security check.

As a rule, the premiums for Medicare Part B will be deducted from your Social Security monthly income. The amount of your Part B premium is based on your Modified Adjusted Gross Income (MAGI) from two tax-years ago. The higher your MAGI, the higher the higher the premium. With higher earning couples, Medicare Part B premiums can exceed $10,000 a year. As a result, many retirees discover that they can’t spend as much as they thought they could.

At Goepper Burkhardt, we have spent years studying Social Security income planning; as a result, we are often able to help our clients make optimum Social Security income decisions. Contact us today to set up a complimentary appointment to discuss your retirement.

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