3 Social Security Strategies That Might Fail You

Social Security is a key income source for millions of retired seniors. If you're entitled to benefits, you no doubt want to get the most out of them. But if you adopt these three strategies, you could end up losing out financially.

1. Filing early to get your money sooner

Your Social Security benefits are calculated based on your 35 highest-paid years of earnings, and you're entitled to those benefits in full upon reaching full retirement age. That age is either 66, 67, or somewhere in between, depending on the year you were born. You're allowed to file earlier, though -- as early as age 62 -- but by claiming benefits ahead of full retirement age, you'll reduce them in the process.

Still, some people are willing to face that reduction if it means getting their money sooner. If you're still working, however, you may not reap that benefit.

Older man sitting at a table, covering his face


Once you reach full retirement age, the Social Security Administration will allow you to work without it impacting your benefits. But if you claim benefits before full retirement age while also collecting a paycheck, you'll risk having a portion of your benefits withheld if your earnings are too high.

The threshold of what's considered too high changes from year to year, but right now, it's $17,640. After that, you'll have $1 in benefits withheld for every $2 you earn. If you'll be reaching full retirement age later this year, your first $46,920 in earnings won't impact your Social Security income, but past that point, you'll have $1 in benefits withheld for each $3 you earn.

Now once you reach full retirement age, the amount previously withheld from your benefits due to working will be added back in, so that money isn't lost forever. But if your point in claiming Social Security before full retirement age is to get your money sooner, consider that you may have some of it withheld, and that you'll reduce your benefits by jumping the gun.

2. Delaying benefits until age 70

While you have the option to file for Social Security before full retirement age, you can also delay benefits past that point and grow them in the process. Specifically, you'll boost your benefits by 8% for each year you hold off, up until age 70. If your health is poor, however, waiting to file for benefits could cause you to lose out on lifetime income, even if you do manage to boost your monthly income.

Imagine you're entitled to a $1,600 monthly benefit at your full retirement age of 67. Waiting until age 70 to file will increase each of your monthly payments to $1,984, but you'll collect 36 fewer payments. This means that you'll need to live until age 82 1/2 to break even. If your health is in bad shape, and you're unlikely to live past that point, then it doesn't pay to delay Social Security. In fact, in this example, you'd lose out on over $34,000 in lifetime income if you were to claim benefits at age 70 but only live until age 75.

3. Delaying spousal benefits to boost your monthly payments

Even if you never worked and aren't entitled to Social Security based on your own earnings record, you may be entitled to spousal benefits worth up to 50% of what your spouse collects. This means that if your spouse gets a monthly benefit of $2,000, you'd get $1,000.

But if you're thinking of delaying your Social Security filing to grow your spousal benefit, don't do it. Unlike regular benefits, spousal benefits aren't eligible for delayed retirement credits, so the most you can collect is half of your spouse's total. If you wait to claim your spousal benefits past your full retirement age, you'll only end up losing out on money that otherwise could have been yours sooner.

The last thing you want to do is shortchange yourself on the Social Security front. Be sure to rethink these strategies if you were initially counting on them, because chances are, they'll backfire on you in a very big way.

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