Most people can affect, but not determine, many aspects of their financial lives. I do not control inflation or the returns on my investments and I suspect that you don't either. There are a few things that each of us can control and some of these things can have a substantial impact on our financial lives; things like Social Security and Medicare benefits. Unfortunately it is possible, and sometimes very easy, to make "mistakes" that can adversely affect us for the rest of our lives. I would like to discuss some common pitfalls and how to avoid them.
When should you file for Social Security benefits? This is an individual calculation that only you can make. A number of articles on Seeking Alpha have discussed this topic. Let us suppose that you have made a decision about when to begin receiving benefits. Your decision should be respected but it might not be because the Social Security Administration (SSA) made some assumption or you made an innocent error. Unfortunately, once you have signed up, it can be very difficult to make corrections.
For example, you can withdraw your application for Social Security benefits (and repay the benefits you received) only if you have been receiving benefits for less than twelve months and you can only withdraw your application once in your life. If you applied for benefits at age 62 and realized that you would like to wait until age 70 to receive much greater monthly benefits, you can file Form SSA-521 to withdraw your application provided you do so within twelve months of your "current date of entitlement" Requirements for Withdrawal (NYSE:WD) of a Benefit Application and not one day later. Now imagine that you accidentally signed up for benefits at 62, realized "immediately" that this was not your intention and had to use up your once in a lifetime ability to withdraw an application for benefits. Even worse, imagine that you accidentally signed up earlier than you wanted and didn't realize this until more than twelve months had passed; you would receive smaller benefits than you expected for the rest of your life.
How could a person accidentally sign up for Social Security benefits?
1. By signing up for Medicare at 65 (or later) and inadvertently signing up for Social Security.
2. By visiting Social Security Administration office for advice and signing an application by mistake or with a undesired initial date for benefits.
3. By filing online or by phone when this was not your intention.
When you do apply for benefits, you should indicate your wishes EXPLICITLY in the Remarks section of the application (see pages 72-73 of Get What's Yours (Revised & Updated)). Online forms ask for the month when you will begin receiving benefits but if you visit your local Social Security Administration office and do not specify in writing when you want your benefits to begin in the Remarks section of the application, the Social Security Administration may assume a starting date six months earlier than you expected, give you six months worth of (reduced) benefits and pay you reduced monthly benefits which might be 4% lower than you anticipated (see pages 72-74 and page 273 of Get What's Yours (Revised & Updated)) for the rest of your life.
Document and date every interaction with the SSA because, if they made a mistake and you appeal, documenting your case can be critical. In particular, verbal instructions (e.g. "I don't want my benefits to begin until I am 70") to a SSA employee in a meeting at a SSA office are not binding; you need to record your wishes in the Remarks section of the application and keep a dated copy of the application just in case you need to appeal.
The Social Security Administration handles your Medicare enrollment. If you decide to apply for only Medicare (and not Social Security) benefits, this page has a link titled "Apply for Medicare only" which sounds like a safe choice. However, click on that link and you find yourself at a page titled Apply Online for Retirement/Medicare Benefits, which offers the possibility that you might accidentally apply for retirement (i.e. Social Security) benefits. If you choose to apply online, follow the instructions carefully and do not electronically sign your application until you are certain that it reflects your exact wishes.
Finally, the Bipartisan Budget Act of 2015 changed several rules to the detriment of retirees. In particular, while your ability to suspend your benefits still requires you to wait until you reach full retirement age (FRA), the advantages of doing so have been reduced. One change is that your spouse can no longer receive spousal benefits while your benefits are suspended; previously a person could apply and suspend at FRA and her/his spouse could apply for and receive spousal benefits.
The techniques of "file and suspend," "deeming," "lump sum payments after suspension of benefits," and others were removed or modified for people who were not grandfathered in. Deeming, in particular, means that if you apply for one benefit, you are deemed to have applied for all benefits to which you might be entitled unless you are grandfathered in. Deeming does not affect survivor or divorced survivor benefits, however.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.