Navigating Social Security can be cumbersome, to say the least. Even basic questions such as when you should retire can come to take on an immense and sometimes desperate tone, as you try to make a decision that doesn’t screw up your retirement beyond repair.
Bankrate spoke with some experts to get their take on what some of the biggest mistakes are that you can make with Social Security. Here’s what you should try to avoid doing as you navigate Social Security’s labyrinth.
Sticking to a one-size-fits-all strategy
The biggest mistake people make is “they do a quick Google search and take information that is meant to be very much at the macro level, and thus not individualized,” says Daniel Milan, managing partner of Cornerstone Financial Services. Often they “fail to take into account their own household budget, financial needs and outside investment income.”
Since life situations can be different, it’s necessary to have a personalized approach that helps you optimize your retirement. And Social Security is not a “one-size-fits-all” experience.
Social Security is complex. While that’s partly by design to help as many people as possible, it still creates a lot of headaches for those nearing retirement. While many retirees have a straightforward experience, others need and can receive specialized aid from the program.
“There are so many different strategies that exist when it comes to collecting benefits and so many variables to consider that listening to advice painted with a broad brush can prove to be detrimental,” says Cory Bittner, co-founder and COO of Falcon Wealth Advisors.
“Creating a financial plan and understanding the inner workings of it should be a prerequisite before making the decision to file to collect benefits,” says Bittner. He suggests people look for a financial adviser who is a fiduciary and is experienced at planning for retirement.
Misunderstanding how much money you’ll receive
If you’ve been working and contributing to the Social Security fund, then you’ve likely received a statement of benefits, an estimate of what you might likely receive in the future. But that figure can be misleading in several ways, and you need to understand what’s driving the estimate.
“People see their statements, the dollar amount that is listed on the front, and assume that’s what they will start receiving monthly whenever they begin filing for their benefits,” says Bittner.
“However, the amount reflected on the front page of a Social Security statement is typically the amount someone will receive if they wait until their full retirement age to begin collecting benefits, and it assumes they work until that age and contribute to Social Security,” he says.
So if you stop working immediately at the earliest age to collect your benefits and don’t wait, don’t expect the full amount. In addition, this dollar amount is pre-tax, so you’ll have to figure how much tax will be stripped from your monthly check before you actually receive it.
As you’re planning your retirement budget, you’ll need to carefully assess how much money will actually make its way into your pocket.