9 Worst Social Security Mistakes You Never Want to Make

These Social Security blunders can put a stick in your retirement spokes if you’re not careful.
Updated April 11, 2024
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Navigating Social Security can be tricky business. It’s not just a matter of claiming your benefits and collecting a check. There’s actually a lot of strategy that goes into effectively managing Social Security income.

Not understanding how to develop that strategy is one of the many ways seniors are throwing away money. Protect your pockets before and during retirement by avoiding these Social Security mistakes.

Not understanding how benefits are calculated

Andrey Popov/Adobe Social Security application

First and foremost, you need to have at least a working knowledge of what determines your Social Security benefit. Your monthly benefit amount is based on your employment history. To be more specific, it’s based on your wages across your 35 highest-earning years. 

The longer you work and the more money you make, the greater your Social Security benefits will be. Conversely, if you take time away from the workforce or experience a salary decrease, you could receive less from Social Security when you retire.

Miscalculating your full retirement age

Monkey Business/Adobe retired woman at work pruning roses

In addition to your work history, how old you are can impact your Social Security benefits, too. That’s why it’s important to know your full retirement age, or the age at which you can retire and receive 100% of your benefit amount. 

Your full retirement age depends on your birth year, but it will be somewhere between 66 and 67 years old. That said, you can technically claim Social Security as early as age 62. But in exchange, you’ll permanently forfeit as much as 30% of your benefit amount. 

Alternatively, if you forego benefits until after your full retirement age, your benefits will increase by up to 8% for every year you wait until you turn 70.

Taking benefits at the wrong time

justasc/Adobe time and money concept image with watch and cash

When it comes to Social Security, timing is everything. Claiming your benefits too early could result in tens of thousands of dollars lost over the course of your retirement. That won’t just impact you; your partner’s benefits could take a hit, too.

On the other hand, there is such a thing as waiting too long. Since your benefit amount won’t increase indefinitely, there’s no incentive to delay your Social Security past age 70. 

Similarly, if you’re concerned about your long-term health, it might not make sense to wait to claim your benefits at all.

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Missing the Medicare sign-up window

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While the Social Security Administration (SSA) doesn’t proactively invite soon-to-be retirees to enroll in Medicare, it will penalize you if you don’t register on time. To avoid any late sign-up charges, enroll in Medicare during your eligibility window. 

This window extends from three months before your 65th birthday to three months after. Keep in mind, though, that higher-wage earners may have to pay an additional premium for Medicare Part B and prescription coverage. 

Don't forget to include those premiums in your retirement budget so you’re prepared for the added expense.

Not checking your employment record for accuracy

Galina Zhigalova/Adobe designer working on computer in the bright modern office

You don’t have to wait until retirement to check on your Social Security benefits. In fact, you shouldn’t. Record-keeping mistakes do happen, and they can cost you money if they’re not corrected.

To review your employment record, create a My Social Security account through the SSA website. This free account lets you see both your estimated benefit amount and your reported earnings. 

At least once a year, review your wage history for errors. Report any discrepancies you find to minimize the impact on your benefit amount.

Pro tip: Save copies of your W2s, pay stubs, or tax returns so you’ll have documentation handy if you need to dispute information on your employment record.

Not understanding how your benefits might be taxed

Kimberly Reinick/Adobe tax forms with calculator and dollar bills

Contrary to what you might think, you could be taxed on your Social Security benefits. At the federal level, you’ll owe taxes on your Social Security if your income is above $25,000 for single filers or $34,000 if you’re married filing jointly.

Your state might tax your benefits, too. Currently, 12 states tax Social Security income: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. 

Still, even if you live in one of these states, you might be eligible for special deductions or income exclusions that can offset your tax liability.

Relying solely on Social Security

motortion/Adobe male retiree sitting alone at kitchen table

Putting all your eggs in the Social Security basket is a risk not worth taking. For starters, there’s no telling what the cost of living might be years or decades from now. If your wages don’t keep up with inflation, your Social Security earnings might not either.

Thanks to a funding shortfall, there’s a possibility that future retirees won’t receive their full benefit amount anyway. Because of this Social Security uncertainty, it’s imperative that you expand your retirement strategy to include other savings vehicles, like 401(k)s or IRAs.

Not considering how other income affects your benefits

vladimir pb/Adobe income statement report on the table

As important as it is to diversify your income streams in retirement, understand that your Social Security payments may be reduced if you earn too much. If you take Social Security before you reach full retirement age and make more than $19,560 a year, you’ll see reduced benefits — and that’s in addition to the early retirement penalty.

Thankfully, only money earned through self-employment or a traditional job counts toward that cap. The SSA doesn’t impose a limit on what you can bring in from sources like investments or annuities. And once you reach full retirement age, you’ll no longer have an earnings cap at all.

Pro tip: Don’t want to work in retirement? Find creative ways to supplement your Social Security income.

Trying to figure it out on your own

focusandblur/Adobe pensioner calculates the pension and bills lamp

Cracking the code to your Social Security benefits is only mildly easier than catching air with a net. There are a lot of moving parts to nail down, especially if you’re going it alone.

Save yourself the stress of DIYing your Social Security strategy, and consult a professional who specializes in retirement planning. They can help you draw up a retirement blueprint that both includes and complements your Social Security benefits, all while simplifying and demystifying the process.

Bottom line

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Taking Social Security isn’t as straightforward as you might think. Maximizing, or at least preserving, your benefit amount takes forethought, planning, and oftentimes collaboration.

Learning the ins and outs of Social Security is only one element of preparing for retirement, however. You also need to understand how to invest your money. That way, you can more easily build a multifaceted retirement plan, one that pulls from multiple resources and accounts for multiple contingencies to better protect your quality of life as you age.

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Author Details

Sarah Sheehan Sarah Sheehan is a writer, educator, and analyst who focuses on the impact of health, gender, and geography on financial equity. Her ultimate goal? To live beyond the confines of chasing the next dollar — and to teach everyone else how to do the same.

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