When it comes to Social Security, even small mistakes in planning or claiming the benefit can cost you money.
The application process is relatively straightforward, yet there are nuances that you may not be thinking about.
In fact, many Americans aren't aware of the right steps to take. While 54% of those who haven't started receiving Social Security said they know exactly how to optimize their benefit, only 6% knew all the factors that determine the maximum benefit someone can receive, according to a Nationwide survey.
Here are common mistakes that people make when it comes to Social Security.
Following others' leads
Just because claiming Social Security at age 62 may be the right move for your sister, it doesn't mean it is the right one for you.
"There are no two claiming decisions that are the same," said Martha Shedden, president and cofounder of the National Association of Registered Social Security Analysts.
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Your relationship status, any time spent in the workforce that didn't result in you contributing to Social Security, the fact that you still may be working and whether you have minor or adult-disabled children all impact your decision.
Claiming too early
You'll get a permanent reduced benefit if you start collecting at age 62. Once you hit full retirement age, which is age 67 for those born in 1960 and later, you will receive 100% of the benefit. If you push your claiming date back to age 70, the benefit jumps to 124%.
Some people take Social Security at a specific age because they are worried about needing it before their next birthday or calendar year, and others may be concerned the trust funds underpinning Social Security will run out.
However, every month that you put off claiming increases your benefit for life, said Matt Rutledge, research fellow at the Center for Retirement Research at Boston College.
Some people claim benefits early because they mistakenly believe they won't live long. However, a report by The Brookings Institution found that about half of those who predicted they had no chance of living until age 75 actually did. Of those who thought they had a 50% chance of living until that age, 75% did.
To be sure, claiming early benefits may be the right move for some people. The program was designed so that the average person will generally get the same amount of benefit, regardless of when they claim.
Yet if you are still working at 62, you'll not only have that income to live on, you may also be able to raise your average earnings. Your benefits are based on your top 35 years of earnings, taking inflation into account.
"If you can make more this year than your 35th highest year before that, you will raise your average earnings, which will raise your Social Security benefit," Rutledge pointed out.
Not checking your earnings records
Keep tabs on your yearly earrings records from your Social Security statement and make sure the information is accurate. The Social Security Administration has accumulated $1.8 trillion in wages for tax years 1937 through 2019 in which administration can't match to any earnings records.
If there are earnings missing, contact Social Security to make a correction.
Not planning as a couple
It's important to look at both spouses' income and expected benefit when planning claims.
Maximize the higher earner's benefit whenever possible, Shedden said. That could mean they hold off collecting until age 70, while the spouse who earned less can start collecting earlier, if necessary.
If you make significantly less than your spouse, there is a spousal benefit that allows one spouse to collect up to 50% of the other spouse's earnings. So if you have a benefit of $500 a month, for example, and your husband or wife has $2,000, it pays to take the spousal benefit instead of your own.
You can't start collecting the spousal benefit until the higher-earning spouse claims it, but you can start getting your own benefit and then you will get a bump up to the spousal amount once your partner claims. The benefit doesn't increase if you want to take it beyond your full retirement age.
You can't change your mind
If you file your Social Security claim and start collecting, you have 12 months to withdraw the application. Pay back what you received, without interest, and the slate is wiped clean, Shedden said.
If you are collecting, have reached full retirement age but aren't yet age 70, you can ask Social Security to suspend your benefit payments. You'll earn delayed retirement credits each month, which will result in a higher benefit payment.
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