Common Social Security Mistakes and How to Avoid Them
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Here's your money briefing for Monday, May 10th. I'm J.R. Whalen for The Wall Street Journal. Once you retire, Social Security will be a major source of funds to help you live comfortably. Sounds easy enough. But if you make a mistake in planning for Social Security, it can cost you dearly right when you need it the most.
So if you want to get the very most longevity insurance you can get, the best protection against a very long life where you may run out of assets, the best thing you can do is to make your Social Security check as large as possible.
In a moment, our contributor Neil Templin will run through some common Social Security pitfalls to avoid, from retiring too early to fears of earning limits and something called the tax torpedo. Yeah, that's coming up after the break.
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Whether you've just started working or you're getting ready to retire, you've had Social Security deductions taken out of your paycheck. That system is there to make sure you've got an income even after your working years are over. But there's a lot more to Social Security than just paying into it now and getting monthly checks later. And it's easy to make mistakes when planning your retirement finances. WSJ contributor Neil Templin has been keeping track of these, and he joins us now to talk about them. Neil, thanks for being with us.
My pleasure. Nice to be here.
Okay, Neil, you spoke with several experts about this topic, and they said a very common mistake is to start claiming Social Security too early.
What are common pitfalls people make when planning Social Security?
Can you tell us about that?
I mean, one way of viewing Social Security is it's a very generous annuity or longevity insurance that will pay out for the rest of your life. And it has a lot of things in its favor. It's inflation adjusted. It has survivor benefits. And for a typical household, 55 to 64, it is like 60% of their retirement assets are the net present value of their Social Security. possible. And the way you do this is you wait as long as possible to claim it. If you claim it 70% versus 62%, you get at least 76% more benefits. Your check is at least 76% larger. So it's a huge difference. And that's a lifetime check. You're going to get 76% bigger check for the rest of your life. And it's not just you. What happens is if you're the top earner in your family, when you die, if you're married, that will go to your spouse.
And your spouse will get that larger check for the rest of his or her life. So if you want to get the very most longevity insurance you can get, the best protection against a very long life where you may run out of assets, the best thing you can do is to make your Social Security check as large as possible.
Yeah, that's a big issue when it comes to people's finances down the line. Are Americans getting that message?
They are to a degree. You know, the number of people waiting is growing, but still there are fewer people that are taking it at age 62. But there still are not a huge number of people that are going all the way till 70.
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