3 Social Security Mistakes Far Too Many Retirees Risk Making When Claiming Benefits

There are millions of older Americans today who rely on Social Security for income. Without those benefits, many retirees would be unable to pay their bills.

For this reason, it's important to claim those benefits at the right time. Here are a few mistakes retirees risk making when signing up for Social Security -- and how you can avoid them.

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1. Filing for benefits early without understanding the consequences

The monthly Social Security benefit you're eligible for in retirement is based on your personal wage history. But your filing age will also play a role in how much money you get from Social Security each month.

If you wait until full retirement age to claim Social Security, you'll get your monthly benefits without a reduction. But you can claim Social Security starting at age 62. And for each month you file before reaching full retirement age, your monthly checks will be reduced. The younger you are when you file, the less monthly income you'll get.

It can be very tempting to claim Social Security early rather than wait all the way until full retirement age. But if you're going to file early, make sure you understand exactly how much monthly income you'll be losing.

It's one thing if you want the money early to spend on leisure while your health is optimal and you have plenty of retirement savings to make up for smaller benefits. But if you don't have a particularly large IRA or 401(k), claiming Social Security early could be dangerous for your finances.

2. Focusing more on monthly income than lifetime income

Just as you can claim Social Security before full retirement age, you can also delay your filing past full retirement age. Each year you wait gives your benefits an 8% boost until you turn 70, at which point you don't get credit for holding off.

You may be inclined to file for Social Security at 70 to score the maximum monthly paycheck you can get. But larger benefits on a monthly basis won't necessarily translate into more income from Social Security on a lifetime basis.

If you don't end up living a very long life, delaying your Social Security claim could leave you with less total income. In fact, if your health is poor, it could make a lot of sense to claim Social Security at 62 despite the fact that doing so will reduce your monthly benefits. If you only live until your early 70s, for example, a claim at age 62 could leave you with more lifetime income than waiting longer.

Either way, when making your decision, don't just think about what monthly benefit your filing age will lead to. Also think about how it might impact your lifetime Social Security paycheck.

3. Forgetting about survivor benefits

If you're single, you may not need to take anyone else's income needs into account when deciding when to claim Social Security. But if you're married and you sign up for benefits early, you could end up leaving your spouse with a smaller survivor benefit.

If you pass before your spouse does, they'll be eligible for 100% of your monthly benefit. If you file for Social Security early and reduce your own monthly checks, you'll also reduce that income stream for your spouse.

Now, if your spouse is entitled to a fairly large Social Security benefit of their own because they were a strong earner, that may not be an issue. But it's important to talk things through with your spouse and consider what might happen if they were to outlive you before making your decision.

There's a lot riding on your Social Security filing choice, so it's important to think things through carefully. You may decide that filing for Social Security early or late makes sense for you. The key, however, is to understand how that decision will impact your long-term finances, as well as your spouse's, if applicable.

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