The decision to retire affects your day-to-day life in many ways, both personally and financially. Your retirement years should be enjoyable, but it’s important to make sure your finances are in order so that you can truly make the most of your newfound freedom. While you’re planning all the fun things you can do with your free time, it’s important to also take note of what not to do, as certain mistakes can derail your retirement plans.
Mistake 1: Taking Social Security Too Early
You can start receiving your Social Security retirement benefit as early as age 62, or as late as age 70. As of 2015, about 33 percent of men and nearly 40 percent of women collected Social Security at 62, which means people are choosing to retire as soon as they can. It might be tempting to collect as soon as you are able, but keep in mind that when you start collecting affects your monthly benefit amount for the rest of your life.
Why This Is a Mistake
While you might be eligible to start taking your benefits at age 62, waiting until your full retirement age — which ranges from 65 to 67, depending on the year you were born — results in a monthly payment that is about 30 percent higher than you would receive at age 62. If you can wait until age 70, your benefit will max out and be another 32 percent higher than at your full retirement age.
Additionally, if you take Social Security before your full retirement age, any income earned above $17,040 (for 2018) will result in a reduction of $1 of your benefit for every $2 of income above that limit.
“Don’t start Social Security as soon as you are eligible,” said certified financial planner Eric McClain of McClain Lovejoy. “It might make sense to delay, perhaps even draw on your other assets first.”
Unless you are physically incapable of working, it’s best to continue to work for as long as possible to max out your Social Security benefits.