Avoid These 4 Mistakes That Can Shrink Your Social Security Income
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Brooke Barley
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Rebekah Evans
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What can you do to maximize your Social Security benefits? You might think simply working and then taking your Social Security benefits when you’re eligible will be fine. For some people, this works out, but for many, this costs them thousands in benefits. Here’s what experts say not to do if you want to make the most of your Social Security.
Taking Your Benefits Right at 62
One of the most common mistakes experts said people make is claiming their benefits right at the eligibility age of 62. “Doing so locks you into a permanent reduction for the next 20 to 30 years, so unless that money is critical to making ends meet at that stage in life, I usually recommend waiting to claim your benefits — ideally until full retirement age,” said Steve Sexton, CEO of Sexton Advisory Group.
It might even cost you to take Social Security as soon as you can. Curt Scott, president and investment advisor representative at Scott Financial Group, said claiming Social Security before full retirement age can result in penalties. “Your benefits could be reduced if your earned income is more than the allowed amount, which in 2025 is $23,400. For every $2 you make over that amount, social security is penalized by $1,” he added.
If you’re married, even one of you delaying taking Social Security until 70 can make a huge difference in how much you receive. “Having the spouse with the highest monthly benefit delay not only provides a higher inflation adjusted monthly income for their life, but also guarantees the surviving spouse that higher benefit as well,” explained Matt Hylland, financial planner at Arnold and Mote Wealth Management. “When one spouse passes away, the surviving spouse will inherit the higher of their or their spouses benefit.”
Misunderstanding Spousal Benefits
Married couples can sometimes cost their spouses if they don’t utilize Social Security correctly. Hylland explained that taking Social Security early can be a costly mistake for a couple who doesn’t know the ins and outs of spousal benefits. “If the lower earning spouse begins their benefit at age 62, many believe that they will receive a step up to 50% of their spouse’s benefit later. But that is not the case, the reduction in benefits received by the lower earning spouse will last their entire life. If you claim Social Security benefits early, your spousal benefit will also be reduced.”
Not Knowing Your Income-Related Monthly Adjustment Amount
According to the Social Security Administration (SSA), your Income-Related Monthly Adjustment Amount (IRMAA) is based on your modified adjusted gross income from the previous year. If you made over a certain amount, your Medicare parts B and D will incur a fee. As Rafael Rubio, president at Stable Retirement Planners, explained, if you’re not sure about your IRMAA and it’s above a certain amount, you could get a surprise decrease in Social Security benefits.
“At your full retirement age, you can earn as much as you want and your earnings aren’t under the annual earnings test,” Rubio said. “However, your Medicare parts B and D may have surcharges if you go beyond certain thresholds. The surcharges will be taken out of your Social Security benefits.”
Ignoring Tax Ramifications
Sexton explained that many people aren’t sure how taxes will affect their Social Security benefits. This is why he recommends tax planning with a professional before taking Social Security. “Up to 85% of your benefits can be taxable, depending on your other income. Your withdrawals from other retirement vehicles, including IRA plans, pensions or part-time gig work can push you into a higher bracket and ultimately shrink what you initially regarded as guaranteed income. This is why tax planning is a critical element of retirement finances that shouldn’t be overlooked.”
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