Retirement Social Security

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.

elderly woman sitting on the sofa and using a calculator
Updated May 28, 2024
Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

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.

Steal this billionaire wealth-building technique

The ultra-rich have also been investing in art from big names like Picasso and Bansky for centuries. And it's for a good reason: Contemporary art prices have outpaced the S&P 500 by 136% over the last 27 years.

A new company called Masterworks is now allowing everyday investors to get in on this type of previously-exclusive investment. You can buy a small slice of $1-$30 million paintings from iconic artists, all without needing any art expertise.

If you have at least $10k to invest and are ready to explore diversifying beyond stocks and bonds,see what Masterworks has on offer. (Hurry, they often sell out!)

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.

Want to learn how to build wealth like the 1%? Sign up for Worthy to get ideas and advice delivered to your inbox.


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.

Earn $200 cash rewards bonus with this incredible card

There's a credit card that's making waves with its amazing bonus and benefits. The Wells Fargo Active Cash® Card(Rates and fees) has no annual fee and you can earn $200 after spending $500 in purchases in the first 3 months.

The Active Cash Card puts cash back into your wallet. Cardholders can earn unlimited 2% cash rewards on purchases — easy! That's one of the best cash rewards options available.

This card also offers an intro APR of 0% for 12 months from account opening on purchases and qualifying balance transfers (then 19.74%, 24.74%, or 29.74% Variable). Which is great for someone who wants a break from high interest rates, while still earning rewards.

The best part? There's no annual fee.

Click here to apply now.

Missing the Medicare sign-up window

Drazen/Adobe mature couple planning their health insurance policy with a doctor at clinic

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.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

  • Go here, select your free gift, and click “Join Today” 
  • Create your account (important!) by answering a few simple questions 
  • Start enjoying your discounts and perks!

You’ll also get insider info on social security, job listings, caregiving, and retirement planning. And you’ll get access to AARP’s Fraud Watch Network to help you protect your money, as well as tools to help you plan for retirement.

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.

Become an AARP member now


Bottom line

TimeShops/Adobe miniature elderly people sitting on coins stack

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.

4.5
info

Western Alliance Bank High-Yield Savings Premier Benefits

  • Earn 4.46% APY1from a top-rated U.S. bank with $70B+ in assets2
  • Enjoy 24/7 online access to your account and funds
  • Interest is compounded daily and posted to your account monthly
  • No fees,3$500 minimum deposit, $0.01 minimum balance to earn APY
  • Enhanced security and FDIC insured
Click here to open a Western Alliance Bank High-Yield Savings Premier Account