7 Mistakes That Can Mess Up Your Social Security Benefits

Social Security payments are a key part of most retirement plans, but many people reduce their benefits by claiming too early, misunderstanding spousal benefits, or misjudging how work income affects payments. A financial advisor can help you understand the rules and choose the right time to claim so that you can maximize your benefits. Here are seven common mistakes you should steer clear of.

1. Claiming Benefits Too Early

It undeniably is tempting to claim Social Security benefits as soon as you become eligible at age 62. However, while early claiming provides immediate access to funds, it permanently reduces monthly payments. The reduction can be as much as 30% of the full retirement age (FRA) benefit, depending on how early you claim.

Still, most people don’t wait long. According to the Social Security Administration’s Annual Statistical Supplement for 2024, some 63% of 50.1 million retired workers received reduced benefits because they claimed benefits before reaching

Delaying benefits beyond FRA, which ranges from 66 to 67 depending on birth year, increases the monthly payment through delayed retirement credits. By waiting past FRA until age 70, retirees receive the maximum monthly benefit.

Delaying isn’t always the right move. Claiming early might be beneficial for people with reduced life expectancy, health issues that force them to stop working or debts that they could pay off with the help of the monthly benefits. To make the best decision, weigh trade-offs between immediate payments and higher lifetime benefits.

2. Overlooking the Earnings Limit

For those who claim Social Security before FRA and continue working, the SSA imposes an annual earnings limit that could reduce or withhold benefits. The limit for individuals under FRA is $22,320 for 2024 and $23,400 in 2025. For every $2 earned above the limit, $1 in benefits is withheld.

The year an individual reaches FRA the earnings limit increases to $59,520 in 2024 and $62,160 in 2025. Also at that point, only $1 is withheld for every $3 earned above the limit.

After reaching FRA, the earnings cap disappears, and benefits are recalculated to include any amounts previously withheld under these rules.

3. Misunderstanding Spousal and Survivor Benefits

Benefits paid to spouses and survivors can provide significant additional income for households, but failing to understand these benefits may leave money on the table. Spouses are eligible for up to 50% of their partner’s FRA benefit if claimed at their own FRA. Survivor benefits allow the surviving spouse to receive the higher of their own benefit or the deceased spouse’s full benefit.

Timing plays an important role in maximizing these benefits. For example, a spouse who claims before their FRA will receive a reduced spousal benefit. Additionally, remarriage before age 60 generally disqualifies widows or widowers from claiming survivor benefits on a deceased spouse’s record. Coordinating these benefits with retirement planning can help maximize household income, especially in two-income households.

4. Failing to Review Your Earnings Record

The SSA calculates Social Security benefits based on the 35 years of highest earnings. Missing or incorrect data in your SSA earnings record can lower your calculated benefit amount. Regularly reviewing your earnings record through your mySocialSecurity account allows you to catch errors, such as unreported income or incorrect amounts, and request corrections before you retire.

If you worked fewer than 35 years, zeros are factored into the calculation for each missing year, further reducing benefits. Adding additional years of work to replace lower-earning years can increase the average and result in higher payments. Maintaining an accurate earnings history is one of the most direct ways to maximize benefits.

5. Overlooking the Tax Implications of Benefits

Social Security benefits may be subject to federal income tax. Taxes are determined based on your combined income, which includes adjusted gross income (AGI), non-taxable interest and half of your Social Security benefits.

For individuals with combined income above $25,000 and couples earning more than $32,000, up to 50% of benefits may be taxable. At higher income levels – above $34,000 for individuals or $44,000 for couples – up to 85% of benefits may be subject to taxation.

Failing to account for these taxes in retirement planning can lead to unexpected liabilities. By managing taxable income through strategies like Roth IRA withdrawals or tax-efficient investment accounts, retirees may reduce the amount of benefits subject to taxation.

6. Misjudging the Impact of Medicare Premiums

Another overlooked issue is how Medicare premiums interact with Social Security benefits. For most retirees, Medicare Part B premiums are automatically deducted from Social Security payments. These premiums are $174.70 per month in 2024 and increase to $185 in 2025.

Additionally, high-income retirees may face income-related monthly adjustment amounts (IRMAA), which increase Medicare premiums based on modified adjusted gross income (MAGI). At higher income levels, the premium increases can be steep. Understanding how these deductions affect your Social Security benefits allows for better retirement cash flow planning and can help prevent surprises.

7. Ignoring the Impact of Divorce

Divorced individuals may be eligible for spousal or survivor benefits based on their ex-spouse’s work record, provided the marriage lasted at least 10 years. These benefits do not affect the ex-spouse’s payments and can provide a valuable source of income in retirement.

However, failing to apply for these benefits or misunderstanding the eligibility rules can result in missed opportunities. For example, benefits can only be claimed if the individual has not remarried.

Bottom Line

Maximizing Social Security benefits requires that you understand how timing, earnings, taxes and eligibility impact your payments. Careful planning can help you avoid mistakes like claiming too early, ignoring tax implications, or mismanaging spousal and survivor benefits. Staying informed and reviewing your options regularly can help you make decisions that align with your retirement goals and financial needs.

Retirement Planning Tips

• A financial advisor can help you determine when is the best time to claim Social Security and manage other factors to maximize your benefits. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• SmartAsset’s Social Security calculator can help you estimate future monthly government benefits.

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