3 Social Security Filing Myths That Could Cost Retirees Thousands

When it comes to claiming Social Security, there's no shortage of advice floating around. Unfortunately, not all of it is good advice.

Following the wrong guidance could result in you making a decision you regret. With that in mind, here are three common Social Security filing myths that could be costly.

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1. You should claim benefits as early as possible because the program's going broke

You might hear that it makes sense to claim Social Security as early as possible because the program is running out of money. But while it's true that Social Security is facing some financial challenges, the program is not at risk of going broke completely.

Right now, the worst-case scenario on the table is benefit cuts. And even if that happens, filing early won't do you any good. It could, in fact, do you harm.

Though you're allowed to claim Social Security as early as age 62, for each month you file before full retirement age, your monthly benefits are permanently reduced. Full retirement age is 67 for anyone born in 1960 or later. And if you're in that category, claiming benefits at 62 could mean facing a lifelong 30% reduction. Ouch.

Even if Social Security does end up cutting benefits, if you reduce your monthly checks by filing early, you'll end up with that much less money. Say benefits are slashed universally by 20%. If you slash your own benefits first by claiming them early, that 20% reduction will then apply to the smaller amount you've locked in. So you shouldn't base your filing decision on fear of the program going away.

2. You can't work while receiving benefits

You may be inclined to stop working once you file for Social Security. But you don't necessarily have to do that.

Once you've reached full retirement age, you can earn any amount of money without risking having benefits withheld. Prior to full retirement age, you'll be subject to an earnings test. And exceeding its limit could mean having benefits withheld and repaid to you later.

But the earnings-test limits may be more generous than you'd think. So before you write off the idea of working once you've claimed benefits, look up what the limits entail each year.

You may find that your wages are below the threshold where you'll have a problem. And again, if you've reached your full retirement age, you won't be restricted on what you can earn at all.

3. You should delay your spousal benefit claim for larger checks

If you didn't work and/or pay into Social Security to a large enough degree to qualify for benefits, you may be entitled to spousal benefits in retirement. Those max out at 50% of what your spouse is eligible for at their full retirement age.

You may hear that it's smart to delay your spousal benefit claim past full retirement age for boosted payments. But that perk only applies to retirement benefits being claimed on your own earnings record. There's no sense in delaying a spousal benefit past your own full retirement age, as it won't put more money in your pocket.

Social Security will probably end up being an important retirement income stream for you. So don't let fear or a lack of knowledge lead you to a bad decision you regret later.

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