I’m a CPA and private finance author with greater than 30 years of expertise, which incorporates writing dozens of articles about Social Safety.
However when it got here time to file for my very own Social Safety final yr, I needed to pause.
I believed I knew the system inside and outside. However as soon as I moved from the theoretical aspect of the desk to the retiree aspect, I spotted that the system is stuffed with invisible tripwires.
There are tax cliffs that aren’t listed for inflation. There are work limits that may freeze your advantages. There are breakeven myths that sound sensible however are literally mathematically illiterate.
If a CPA can get tripped up by these guidelines, I do know it’s occurring to everybody else. Listed here are the 5 dumbest errors I see retirees make — and the way I averted them.
1. Falling for a typical tax delusion
Most individuals assume that since they paid taxes on their wages earlier than they went into Social Safety, their advantages will probably be tax-free.
That’s a logical assumption, however solely true you probably have little or no different revenue.
When you have different revenue sources — like a pension, withdrawals from a 401(okay) and even part-time work — you’ll doubtless set off a tax method generally known as provisional income.
The IRS takes your adjusted gross income, provides any tax-free curiosity after which provides half of your Social Safety advantages. If that quantity is over $25,000 (for single filers) or $32,000 (for these married submitting collectively), you owe taxes on as much as 50% of your advantages. If it goes over $34,000 for single filers or $44,000 for joint returns, you owe taxes on as much as 85% of your advantages.
Right here’s the kicker: These thresholds had been set within the Nineteen Eighties and by no means adjusted for inflation. They had been meant to tax the wealthy, however as we speak, they hit the center class. Be ready for this tax invoice as a result of it catches many people off guard yearly.
2. Obsessing over the breakeven age
After I informed my associates I used to be serious about delaying my advantages declare till I hit age 70, all of them stated the identical factor: “However what for those who die?”
They pulled out napkins and calculated my breakeven age — the age I’d should stay to for the larger checks to beat the smaller, early checks. Often, the maths says you must stay to about 80 to come back out forward.
Right here’s the issue with that math: It assumes you will die younger.
Based on the Social Safety Administration’s actuarial tables, for those who’re a person who has already made it to 65, your common life expectancy is one other 18 years (age 83). When you’re a lady, it’s almost 21 years (age 86).
When you declare early at 62 to “get yours” after which stay to 90, you price your self tens of hundreds of {dollars} in assured, inflation-protected revenue. Except you’ve got a severe well being problem, betting by yourself early demise is a foul monetary technique.
3. Working an excessive amount of (the earnings check)
I’ve a pal who claimed advantages at 63 however stored his consulting gig. He thought he was double-dipping. Then he obtained a letter from the SSA telling him they had been withholding his checks.
He violated the earnings test.
In 2026, for those who declare advantages earlier than your full retirement age, you may solely earn $24,480 a yr. For each $2 you earn above that restrict, the federal government withholds $1 of your advantages.
They don’t take it endlessly. They ultimately recalculate your profit while you hit full retirement age to pay you again, however that doesn’t assist you to pay the electrical invoice as we speak. When you plan to maintain working, don’t declare early for those who don’t should.
4. Stiffing your partner
I’m the upper earner in my family. If I declare early, I’m completely capping the survivor profit my spouse will obtain if I die first.
When the upper earner dies, the decrease earner bumps as much as the upper earner’s examine. But when the upper earner took a diminished examine at 62, the surviving partner is caught with that diminished quantity for the remainder of their life.
In case you are the excessive earner, you aren’t simply delaying for your self. You’re basically shopping for a better lifetime revenue on your partner.
5. Setting it and forgetting it
Social Safety isn’t a “set it and overlook it” revenue stream.
Yearly, there’s a price of dwelling adjustment (COLA). In 2026, it’s 2.8%. However Medicare Part B premiums additionally rise, and so they’re deducted immediately out of your examine.
I examine my private “my Social Security” account on-line yearly. I examine the earnings report to ensure they didn’t miss a yr of labor (which occurs greater than you assume). And I examine my tax withholding settings.
When you don’t ask the SSA to withhold taxes out of your examine (type W-4V), you will get hit with a large tax invoice in April. For a lot of, it’s much less painful to have it withheld month-to-month than to jot down a giant examine to the IRS every year.
