Estimated read time: 5-6 minutes
Do you plan to file for Social Security in the next five years?
Filing for social security could be one of the most important financial decisions of your life.
Why? Because the difference between your best and worst-case scenarios could mean hundreds of thousands of dollars in lifetime income.
But getting the most out of your benefits is a lot more complicated than you may realize.
Most people make critical mistakes And mistakes are often irreversible and come with a big price tag.
We want to help you avoid this. So, below are three common mistakes that could needlessly cost you a fortune.
Mistake #1: Claiming your benefits at the wrong time
When it comes to filing for Social Security, there's no one-size-fits-all strategy.
The timing of when you file for your benefits will be totally unique to your specific situation. So, what worked for your parents, siblings, and friends might not be the optimal choice for you.
Most people think that filing for social security is just about filing early or delaying their benefits until age 70. But it's a lot more complicated than that.
Your decision could not only impact the amount of your monthly benefits check, but also the taxes on your benefits, your IRA and 410K withdrawals and other investment income. It could also cause you to forfeit thousands of dollars in other benefits every year and double your Medicare premiums.
Pro tip: Don't just focus on getting the biggest benefits check. Be sure to consider how your decision could impact your taxes, spousal benefits and Medicare premiums. This will help you get the most "net" income from Social Security.
Mistake #2: Overlooking the tax consequences on your benefits
Most people don't think about taxes when it comes to their Social Security benefits.
They've researched how much their estimated monthly benefits will be in retirement. They assume all of this money is theirs. And they're counting on it to help them pay for retirement.
But what they don't realize is they could pay taxes on these benefits. And it could be a big number. You could pay taxes on as much as 85% of your Social Security income.
So the money you were counting on could be less than you thought.
Income thresholds were created to determine what percentage of your benefits will be taxed.
If your retirement income is more than $25,000 a year (or $32,000 for couples), you'll owe taxes on 50% of your benefits. If your income exceeds $34,000 a year ($44,000 for couples), you'll have to pay taxes on as much as 85% of your benefits.
But these income thresholds haven't been adjusted to keep pace with inflation. In fact, they haven't changed since the law was introduced nearly 40 years ago. So each year, more and more people will owe taxes on their benefits.
Pro tip: You have more control over your taxes in retirement than you do at any other time of your life. And if you take advantage of some simple tax planning strategies before you file for Social Security, you could dramatically reduce — or possibly eliminate these taxes.
Mistake #3: Relying on the Social Security Administration for personalized advice
When people get overwhelmed with filing for Social Security, they think they can get help from the people working at the Social Security Administration.
But that's probably not a great idea.
According to Forbes, "The Social Security Administration has some 40,000 undertrained, overwhelmed, and sometimes arrogant staffers who routinely tell people things that are dead wrong, half wrong, misleading, or incomplete."
"As a result, thousands of people are making terribly wrong decisions daily claiming Social Security retirement benefits — decisions that are costing them huge sums."
Pro tip: The bottom line is you can't rely on advice from the Social Security Administration.
And that's why it's critical you understand how to avoid these mistakes outlined here.
Where should you start?
There's a lot of money at stake here. If you've made an average income throughout your career your Social Security benefits could be several hundred thousand dollars in lifetime income. And if you've made an above-average income, it could be over $1 million.
The Social Security Administration has some 40,000 undertrained, overwhelmed, and sometimes arrogant staffers who routinely tell people things that are dead wrong, half wrong, misleading, or incomplete. As a result, thousands of people are making terribly wrong decisions daily claiming Social Security retirement benefits — decisions that are costing them huge sums.
That's why you can't take this decision lightly.
So, we've put together a short educational video that further explains how you could avoid these mistakes when filing for Social Security.
Plus, you'll have an opportunity to receive a free, customized Social Security Analysis, which pinpoints the exact strategy that could help you wring every nickel out of your benefits.
You can watch it on demand right now by clicking here.
Tyson Thacker and Ryan Thacker are the President and CEO of B.O.S.S. Retirement Solutions with seven offices throughout Salt Lake City. B.O.S.S. Retirement Solutions is a four-time winner of Utah's Best of State Award.
If you have any further questions about social security, you can speak to one of their fiduciary advisors by calling 800-637-1031.
Advisory services offered through B.O.S.S. Retirement Advisors, an SEC Registered Investment Advisory firm. Insurance products and services offered through B.O.S.S. Retirement Solutions. The information contained in this material is given for informational purposes only, and no statement contained herein shall constitute tax, legal or investment advice. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual's situation. You should seek advice on legal and tax questions from an independent attorney or tax advisor. Our firm is not affiliated with the U.S. government or any governmental agency.