7 Costly Social Security Mistakes Women Are Likely to Make

Throughout life, women face different challenges from men. Those challenges don't stop at retirement. In their retirement years, women face an average longer life expectancy and lower lifetime earnings to lean on. Unfortunately, the wrong moves could cost women thousands during retirement.

This guide explores the costly Social Security mistakes women are likely to make and how to avoid wasting your money.

1. Claiming benefits too early

It's possible to claim your Social Security benefits as early as age 62. Although filing early gives you a chance to start receiving a monthly check, this choice results in a smaller monthly payment. If you wait to receive your benefits, the size of your check will grow.

For women facing a long retirement, tapping into Social Security benefits early can hurt their spending power over the long term.

2. Overlooking spousal or ex-spousal benefits

In some cases, women can access additional benefits by exploring spousal or ex-spousal benefits. Unfortunately, many women miss out on the larger benefits they are entitled to through a current or former spouse.

If you are currently married or have been married in the past, it's worth exploring this possibility. For women who were married to their ex for at least 10 years and are at least 62 years old, you might be able to collect monthly payments equal to between one-third and one-half of your former spouse's benefit.

3. Not accounting for survivor benefits

The loss of a spouse can leave widows reeling. But when it comes to Social Security benefits, it's essential to look into survivor benefits options. Many widows don't claim their full survivor benefits.

If you've lost a spouse who contributed to the Social Security system, you might be eligible to receive their full monthly check. For many women, this could increase their monthly retirement income.

4. Assuming benefits are tax-free

It's easy to assume that your Social Security benefits are tax-free. However, the reality is that many taxpayers are subject to federal income taxes and potentially state income taxes.

Before spending your Social Security check, determine whether or not you'll need to pay taxes and how high the burden will be. For example, singles filing a federal tax return with an income of $25,000 to $34,000 may have to pay federal income tax on up to 50% of their benefits. But if you earn over $34,000, you may have to pay federal income tax on up to 85% of your benefits.

If you expect to owe taxes, make sure to budget for this expense throughout the year.

5. Failing to factor in work history gaps

A gap in your working years will likely lead to a drop in your earnings and a lower Social Security benefit amount. For starters, having fewer than 35 years of earnings on your Social Security record will result in a lower benefit amount.

However, career breaks for caregiving, such as taking care of children or aging parents, can often lower your earning potential. When you earn less in your working years, you'll receive a lower Social Security benefit.

6. Relying solely on Social Security for retirement income

This isn't a mistake exclusively reserved for women. But many retirees make the mistake of relying solely on their Social Security benefits to cover their retirement expenses.

Generally, these benefits are not enough to support the ongoing expenses related to retirement, such as medical bills and living expenses. Additionally, a Social Security check is unlikely to fund the retirement dreams of many, such as traveling or moving closer to their grandchildren.

Throughout your working years, it's essential to build a retirement nest egg. You can lean on those savings to create a comfortable retirement.

7. Letting a partner handle all of the money

Many women make the mistake of allowing their partner to handle all financial decisions. Although this takes a chore off your plate, it can burn you in the long term. Not only does this give your partner the power to make financial decisions, but it also prevents you from developing sound money management skills.

Even if your partner is around to take care of the money management for the rest of your retirement, passing off this critical responsibility means you won't have a say in some of the most significant financial decisions affecting your life.

Building the skills to manage your own money can help you create the life you want to lead. Additionally, opting to make joint financial decisions about joint financial resources allows both partners to have a say in these major decisions and potentially split the burden of managing funds more evenly.

Bottom line

Navigating the Social Security system can be tricky. You can make the most of this potential income stream with the correct information and thoughtful planning. However, building wealth through alternative means, such as investing in the stock market or real estate, is essential to fund your retirement expenses.