Social Security is supposed to offer retirees a sense of financial security after decades of hard work. Yet, for many, it falls painfully short of providing the comfortable retirement they had imagined. While low payouts and rising living costs play a role, there’s another critical factor at work: the decisions retirees make about their benefits.
Many retirees are unknowingly making mistakes that reduce their Social Security income or stretch it too thin. These mistakes can lead to unnecessary financial hardship. If you’re approaching retirement or already collecting benefits, here are five common missteps you’ll want to avoid to protect your financial future.
1. Claiming Benefits Too Early
One of the biggest mistakes retirees make is claiming Social Security benefits as soon as they become eligible at age 62. While it might be tempting to start receiving payments right away, doing so can significantly reduce your monthly benefit for life.
For each year you delay taking Social Security up until age 70, your monthly benefit increases by a certain percentage. Claiming early can lock you into permanently lower payments, sometimes by as much as 30%. For retirees living on a fixed income, that reduction can be the difference between financial security and financial struggle.
If possible, delaying your claim not only boosts your monthly income but also gives you a greater buffer against inflation and unexpected expenses later in life.
2. Not Understanding the Impact of Working While Receiving Benefits
Some retirees think they can easily supplement their Social Security income by working part-time. While working during retirement can be a smart move financially, it’s important to understand how it affects your benefits if you claim before reaching full retirement age.
If you earn above a certain threshold, your Social Security payments may be reduced. Although the Social Security Administration will eventually adjust your benefit once you hit full retirement age, those early reductions can create short-term financial stress and confusion. Many retirees don’t plan for this adjustment and find themselves with less income than they anticipated.
Before taking on work in retirement, make sure you understand the earning limits and how your income might temporarily impact your Social Security payments.
3. Ignoring Spousal and Survivor Benefits
Another costly mistake is overlooking the spousal and survivor benefits available through Social Security. Many married couples, and even widowed individuals, don’t realize they could be eligible for additional support. Spouses may be entitled to up to 50% of their partner’s benefit, even if they never worked themselves. Widows and widowers may qualify for survivor benefits based on their deceased spouse’s record, often allowing them to switch to a higher monthly benefit.
Failing to research and claim these benefits can mean leaving hundreds or even thousands of dollars on the table each year. Understanding all your available options can maximize your income and provide much-needed financial stability.
4. Mismanaging Other Retirement Income Sources
Social Security was never intended to be a retiree’s sole source of income. Yet many people treat it that way, often because they haven’t adequately planned for coordinating Social Security with other savings, pensions, or investments. Without a clear withdrawal strategy, retirees may end up depleting other assets too quickly or triggering higher taxes than necessary. Poor management of retirement accounts can lead to greater financial strain, especially in later years when medical expenses tend to rise.
Smart financial planning involves integrating Social Security into a broader retirement income strategy. Working with a financial advisor can help ensure that your benefits and savings work together to support a sustainable, long-term retirement.
5. Failing to Plan for Longevity
Many retirees underestimate how long they’ll actually live. While it’s unpleasant to think about longevity risk, the chance that you’ll outlive your money is a very real concern.
By planning retirement income around an average life expectancy rather than a more conservative estimate, retirees risk exhausting their funds in their 80s or 90s. Since Social Security is often the only guaranteed income stream that lasts a lifetime, making decisions that maximize its value is crucial.
Thinking long-term when making decisions about when to claim benefits, how to manage savings, and how to plan for healthcare costs can help retirees avoid poverty later in life.
Take Control of Your Financial Future
Social Security can be a powerful tool for supporting a comfortable retirement, but only if approached thoughtfully. Mistakes like claiming too early, overlooking available benefits, and failing to plan for longevity can trap retirees in a cycle of financial hardship that’s hard to escape.
The good news is that by educating yourself now and making more strategic decisions, you can set yourself up for greater financial independence and peace of mind in your retirement years.
Have you thought about your Social Security strategy yet, or have you seen someone you know struggle because of these mistakes?
Read More:
How Much Social Security Will You Actually Get When You Retire?
The Best Age to Take Social Security, Based Upon Various Life Expectancy Scenarios
Riley is an Arizona native with over nine years of writing experience. From personal finance to travel to digital marketing to pop culture, she’s written about everything under the sun. When she’s not writing, she’s spending her time outside, reading, or cuddling with her two corgis.
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