Every day expensive errors when choosing Social Security.

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Every day expensive errors when choosing Social Security.

Every day expensive errors when choosing Social Security.

ric dalberri, founder, retirementusa.com

When people don’t grasp all their Social Security options, they make costly mistakes.

The most common are:

  • Grabbing benefits too early.
  • Failing to take full advantage of spousal benefits.

Understanding the options isn’t easy, however: There are more than 8,000 claiming strategies for married couples.

Mistakes can add up big-time

The difference between the best claiming methods and the worst can be up to $100,000 in additional lifetime benefits for single people and up to $250,000 for married couples, depending of course how long you are on this earth.

Benefits grow by 6 percent to 8 percent annually between age 62 and 70. Those larger amounts are further compounded by cost-of-living increases over the recipients’ lifetimes.

For every $1 you spend of your own money (while you delay starting benefits), the government is effectively offering $2 to $3 in additional lifetime income.

When Social Security was first introduced, the age was 62.  Why 62? Because the actuaries were reporting many individuals did not live past 62.  If they did, it was not much after that.  However, we are not our parents 62 since we are living much longer and are living more healthy lives.  The new 70 is 60.  Of course, you never ever know when your actuary will come to fruition.  When it does, your Social Security will end in that your spouse can take the higher of the two.  In either case, one check dies with you.

Then there’s the theory; why would I leave all that money on the table by waiting to receive my Social Security that adds up to thousands of dollars. It would take 9-11 years to make up the money you left behind if you decide to wait to receive your benefits at a later age.  Sure, you will be receiving more money each month because you waited to receive benefits.  What about those 9-11 years to make up what you left on the table?  It only depends if you continue to live.

Happy Trails to you.

Retire smart