The 5 Social Security Decisions That Are Hardest To Undo in Retirement
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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For many retirees, Social Security feels like income you “turn on” when the time feels right. But financial advisors say some claiming choices can lock retirees into lower income, higher taxes or reduced survivor benefits. These decisions often feel minor at the moment yet can cause permanent problems.
Financial experts explained which Social Security decisions are hardest to undo in retirement.
1. Claiming Too Early
Claiming Social Security early remains a top regret because people aren’t clear on how the system works and how long they are likely to live, according to Frederick Saide, managing partner at MoneyMattersUSA. “They treated Social Security as a bank account with their name on it, with a balance they could withdraw. Inflation also takes a nasty toll on the reduced benefit paid over an extended lifetime,” he said.
Brady Lochte, a fiduciary financial advisor and founder of Axon Capital Management, said it is common for retirees to misunderstand the math behind early claiming.
“Claiming at 62 simply because the money was available tops the list,” Lochte said. He laid out that for someone with a full retirement age of 67, claiming early means accepting a permanent 30% reduction, potentially $400,000 or more less over a 30-year retirement. “The ‘I’ll invest the difference’ argument rarely works because most people spend it, not invest it,” he said.
2. Longevity Miscalculations
Many retirees base claiming decisions on unrealistic assumptions about health or lifespan, only to find those assumptions were wrong.
Lochte said, “Health often improves after leaving stressful work, leaving retirees locked into reduced benefits for 30 [plus] years based on pessimistic assumptions.”
Saide said longevity analysis should be the starting point of every claiming conversation. “From that set of assumptions, we can project out how long their income will last and where Social Security fits into their income plan.”
3. Survivor Benefit Decisions
Claiming decisions affect not just the retiree, but also a surviving spouse. “When the higher earner claims early, they permanently reduce the survivor benefit their spouse receives after death,” Lochte said.
Saide noted that strategic claiming just requires careful planning. “Higher survivor benefits require a strategy on when the higher earner takes Social Security,” he said. “If Social Security is regarded as an annuity with an inflation adjustment, then the survivor benefit is easier to understand for this client.”
4. Tax and Medicare Interactions
Many retirees assume Social Security is tax-free or minimally taxed, only to be surprised by how withdrawals and Medicare premiums interact once benefits begin, Lochte said. “Medicare IRMAA surcharges blindside people when higher income makes Part B cost $500 [or more] monthly instead of $185.”
Saide added that planning software can oversimplify these interactions. “Most planning software defaults to 85% being includable as taxable income, but that is erroneous; it might be 50% or not at all,” he said. “Few people have ever heard of IRMAA.”
5. Relying on Informal Advice
Another irreversible mistake is trusting incomplete or incorrect guidance at the moment of claiming.
“The biggest missteps are not being an advocate for yourself when claiming benefits and not seeking a second opinion from a financial planner,” said Ryan Monette, a CFP and financial advisor with Savant Wealth Management. “I have witnessed several instances in which an individual simply accepted what a Social Security representative told them, only to later find out the representative was incorrect, costing the individual benefits.”
Monette said friends and acquaintances can also unintentionally steer retirees wrong. “Too many people listen to their friends and acquaintances and believe what they hear is true or that they will end up with a similar result,” he said.
Social Security claiming should be part of a larger retirement strategy made well in advance of retirement.
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