Too many people rely solely on Social Security without considering other income sources or fail to understand how working while collecting can impact their benefits. Here, we’ll explore common mistakes that can mess up your Social Security benefits and how to avoid them, ensuring you maximize what you’re entitled to in retirement.
1. Ignoring Social Security’s Impact on Divorce Settlements
Many divorced individuals overlook the benefits available through their ex-spouse’s Social Security record. If you were married for at least 10 years, you may be entitled to up to 50% of your ex’s benefit, assuming it’s higher than your own. SSA data shows that 27% of divorced women and 15% of men claim Social Security benefits from their ex-spouse’s record. The mistake could cost you thousands of dollars over the years, especially if your ex-spouse’s earnings were substantially greater than yours. Understanding this can drastically improve your financial situation in retirement.
2. Failing to Track Earnings Records
Your Social Security benefits are based on your lifetime earnings, so keeping track of them is crucial. 20% of Social Security earnings records contain errors, potentially reducing benefits by 5-10% National Bureau of Economic Research, 2015. Review your earnings record annually and report any discrepancies immediately. Fixing errors early ensures you don’t end up with less than you’re entitled to. A quick check can prevent financial issues that would otherwise arise down the road.
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3. Claiming Early and Losing Lifetime Benefits
Claiming Social Security benefits early may seem like an attractive option, especially when money is tight. However, doing so can reduce your monthly payouts for the rest of your life. Approximately 40% of Social Security recipients claim benefits at age 62, reducing monthly benefits by 30%, according to the National Institute on Retirement Security, 2020. It’s critical to weigh your financial needs against the penalties that come with early claims. Waiting a few years could result in significantly higher monthly payouts in the future.
4. Not Considering Spousal Benefits
Many people don’t fully understand the power of spousal benefits. If your spouse has earned more throughout their career, you could be eligible for a portion of their Social Security benefits. This option allows you to claim the higher amount—up to 50% of your spouse’s benefit, depending on your age and work history. In 2018, Urban Institute reported that 2.6 million recipients claimed spousal benefits, with half of couples receiving benefits up to 50%.
5. Misunderstanding the Benefits of Postponement
Delaying Social Security benefits until after your full retirement age can increase your monthly payout, but it’s important to understand the limits. While each year you wait boosts your benefit by 8%, there’s a point when further delay doesn’t add much. After age 70, there’s no benefit to postponing, yet many people don’t realize this. SSA says that delaying Social Security benefits until age 70 increases benefits by 8% per year.
6. Working While Collecting Social Security Before Full Retirement Age
If you’re still working and receiving Social Security before reaching full retirement age, your benefits could be reduced. The Social Security Administration penalizes you for earning above a certain threshold. In 2025, that limit is $21,240 annually. For every $2 you earn over that amount, $1 will be withheld from your benefits. SSA estimates that earning over $21,240 before full retirement age will reduce benefits by $1 for every $2 earned.
7. Underestimating the Tax Implications
A lot of people assume Social Security benefits are tax-free, but that’s not always the case. Depending on your income, up to 85% of your benefits may be taxable. The more you earn from other sources, the higher the percentage taxed. You could be hit with unexpected taxes if you fail to plan for them. For some, this can mean a smaller income than expected, especially if you’re in a higher tax bracket. Understanding the tax rules early on allows you to better prepare for the financial impact during retirement.
8. Failing to Maximize Survivor Benefits
Many people don’t plan for how Social Security will support their spouse in the event of their death. Survivor benefits allow a spouse to collect the deceased’s Social Security if it’s higher than their own. However, failing to maximize this benefit could leave your surviving spouse with significantly less income. Understanding how survivor benefits work and timing claims accordingly is essential.
9. Ignoring the Impact on Disability Benefits
Unclaimed Social Security benefits can interfere with eligibility for other programs like disability benefits. If you’re eligible for Social Security disability but have delayed claiming your retirement benefits, it could complicate your situation. The overlap between these programs is often misunderstood, and making the wrong decision may delay or reduce your overall support. Carefully evaluating when and how to claim can ensure you’re maximizing both your retirement and disability benefits.
10. Relying Only on Social Security as Retirement Income
Relying solely on Social Security for retirement is risky. While it provides a steady income, it’s often not enough to cover all your expenses. Social Security was designed as a supplement, not a full income replacement. Without additional sources of income like personal savings, investments, or pensions, you might find yourself struggling financially in retirement. Diversifying your income streams can give you more financial freedom and security.
11. Making Changes to Your Social Security Account Without Fully Understanding the Consequences
Changing your Social Security account without fully understanding the implications can lead to financial setbacks. Some alterations, like switching from one benefit type to another, can permanently lower your monthly payments. You might also inadvertently make decisions that affect your spousal or survivor benefits down the line. It’s essential to fully comprehend the long-term effects of any changes before making them.
12. Not Taking Advantage of Social Security Benefit Estimators
Many people overlook Social Security’s benefit estimates, but using them can provide a clear picture of your future income. These tools calculate your estimated benefits based on your work history and planned claiming age. By ignoring these estimates, you risk miscalculating how much you’ll receive in retirement. Having accurate projections allows you to plan accordingly, whether that means adjusting your savings strategy or altering your retirement age.
13. Forgetting the Earnings Test for Non-Retired Workers
Social Security has a specific earnings test that applies to people who are under full retirement age and still working. If you earn more than a certain amount, your benefits will be reduced. In 2025, the income limit is $21,240. For every $2 you earn above this threshold, $1 will be withheld from your benefits. Failing to consider this rule could result in losing benefits you might have expected. If you plan to work while collecting Social Security, understanding this test is crucial to avoid unnecessary reductions in your monthly payments.
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