Being financially savvy and fully understanding Social Security benefits can make a significant impact on your standard of living during retirement. "We probably have about 20% of retirees who are totally dependent on Social Security for their only source of income," Boston University economist Laurence Kotlikoff tells CBS MoneyWatch. "This is a big deal. You have to take this seriously, and you have to do your homework." Here are three mistakes that can cost you when it comes to Social Security benefits.
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1. Claiming Social Security Too Early
iStockClaiming your Social Security benefits too early is a bad idea and can cost you $182,000 in lost benefits, Kotlikoff says. “You can apply for benefits at age 62, but the benefit you receive will be up to 30% less than it would be if you waited until what the Social Security Administration deems ‘full retirement age’ (FRA),” says Morgan Stanley. “Unless you really need the money, consider waiting to apply. And if you can afford it, consider delaying your application for these benefits until age 70 when your benefit will be about 32% higher than it would be at FRA.”
2. Earning Too Much Money
ShutterstockIf you earn too much money it can impact your Social Security, experts warn. “If you make more than $22,320 a year in wages and start to receive Social Security benefits early, Social Security will deduct $1 from your benefit payments for every $2 of earnings you earn above the annual limit,” Nick Strain, senior wealth advisor at Halbert Hargrove, tells Bankrate.com. “Pensions, annuities, investment income, interest, veteran benefits or government and military benefits do not count against you.”
3. Not Tracking Overpayments
iStockIf the Social Security Administration sends you too much money, you’d better put it away, because any mistakes they make will become your responsibility. “Their mantra, their rule, is ‘Our mistake is your mistake.’ And you can appeal it or ask for a waiver. The only reason they will waive this-- clawback is if you are indigent: really, really poor,” Laurence Kotlikoff tells CBS News.
“The worst part of it is they have all the power,” adds personal finance expert Terry Savage. “Because they say, ‘If you don't pay us back, we're just gonna cut your benefit check.’ Imagine: People live on those checks. And all of a sudden you get no check? Or a small amount?”
