Why Only Listening To Social Security Representatives Could Cost You

Social Security representatives are useful when it comes to gaining you access to your file and important documents needed for your benefits claim, or to help you through the claims process during interviews, conferences, or hearings. They can also keep you from making mistakes that get your benefits suspended or terminated, often caused by not understanding the rules.While there are Social Security rules that can drastically increase your monthly benefits, of course, they can also decrease them if you make bad decisions.

According to the Center on Budget and Policy Priorities, there are roughly 70,000 Americans who end up with their benefits being suspended, and 40,000 who end up losing their benefits altogether by purposefully trying to defraud the system or just by accident. In 2019, fintech company United Income released the paper "The Retirement Solution Hidden In Plain Sight," which reported that American households were losing an average of $3,400 per year in benefits due to claiming their benefits at a suboptimal time.

As such, a financial adviser may actually be better suited to assist you with retirement planning than a Social Security representative. For instance, your Social Security benefits could be impacted by whether or not you have a spouse who is claiming your benefits. A representative may not be able to tell you how best to navigate that situation.

Your life expectancy can also be another issue that can really hurt your finances if you fail to factor that in. Not only will this place a tighter limit on the amount of Social Security benefit you're eligible for, but it may not offer a practical amount to live on. According to the U.S. Department of Health and Human Services, the average life expectancy of Americans in 2022 was 77.5 years. While your Social Security representative will help you get your benefits, they won't necessarily calculate your finances against your life expectancy to determine how much you will need and whether you should take your benefits now or not.

With Social Security measuring your benefits against your 35 years of highest earning potential, lacking the 35 years of work experience results in the Social Security Administration inputting zero for all those missing years. If this is you, a financial adviser will be the person to tell you whether you'll receive enough to even consider retirement at say, 62 years old, especially with another potential 16 or so years on the clock. (See actions you can take if you retire early to bridge the income gap.)

One caveat: If you go the route of a financial adviser, avoid advisers who take commissions rather than hourly fees. A study by the professional membership association Investments & Wealth found that commission-based advisers tended to advise clients to take Social Security benefits earlier, often based on better compensation for themselves.

As mentioned in the introduction, there are a number of Americans who end up with their benefits suspended or terminated after becoming eligible to receive them. While working through early retirement isn't against the rules, earning too much money while receiving Social Security benefits is, and will cost you. People under the full retirement age at the time they receive their benefits will lose a dollar for every two dollars over $22,320 they make every year.

Even if you turn full retirement age in the year you claim your benefits, you'll still be penalized one dollar for every three dollars you make over $59,520 until your birthday month. In this instance, a financial adviser can help you with projecting a budget that allows you to prosper yet not go over limits that can limit your benefits or lose them altogether. For instance, taking out a life insurance policy with a cash value attached may be added to your income, and potentially become a reason for the Social Security Administration to suspend or even terminate your benefits.

A financial adviser may be able to help you realize other forms of income that won't be used against you. For example, benefits from military or government service, investments, and pensions are all additional forms of income that are exempt from consideration by the Social Security Administration. Before you apply for Social Security, read these important tips for choosing a financial adviser to maximize your benefits.