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 12 months, 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 noticed that the system is crammed 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 taking place to everybody else. Listed below are the 5 dumbest errors I see retirees make — and the way I prevented them.
1. Falling for a standard tax fable
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 in case you have little or no different earnings.
If in case you have different earnings sources — like a pension, withdrawals from a 401(ok) and even part-time work — you’ll possible set off a tax formulation generally known as provisional earnings.
The IRS takes your adjusted gross earnings, 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 at the moment, 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
Once I advised my buddies I used to be interested by delaying my advantages declare till I hit age 70, all of them mentioned the identical factor: “However what when you die?”
They pulled out napkins and calculated my breakeven age — the age I’d must stay to for the larger checks to beat the smaller, early checks. Normally, the mathematics says it’s a must to stay to about 80 to return out forward.
Right here’s the issue with that math: It assumes you’ll die younger.
In keeping with the Social Safety Administration’s actuarial tables, when you’re a person who has already made it to 65, your common life expectancy is one other 18 years (age 83). In the event you’re a girl, it’s almost 21 years (age 86).
In the event 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 earnings. Except you have got a critical well being problem, betting by yourself early demise is a nasty monetary technique.
3. Working an excessive amount of (the earnings take a look at)
I’ve a good friend who claimed advantages at 63 however stored his consulting gig. He thought he was double-dipping. Then he bought a letter from the SSA telling him they had been withholding his checks.
He violated the earnings take a look at.
In 2026, when you declare advantages earlier than your full retirement age, you’ll be able to solely earn $24,480 a 12 months. For each $2 you earn above that restrict, the federal government withholds $1 of your advantages.
They don’t take it without end. They finally recalculate your profit if you hit full retirement age to pay you again, however that doesn’t allow you to pay the electrical invoice at the moment. In the event you plan to maintain working, don’t declare early when you don’t must.
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 primarily shopping for a better lifetime earnings on your partner.
5. Setting it and forgetting it
Social Safety isn’t a “set it and overlook it” earnings stream.
Yearly, there’s a price of dwelling adjustment (COLA). In 2026, it’s 2.8%. However Medicare Half B premiums additionally rise, and so they’re deducted instantly out of your examine.
I examine my private “my Social Safety” account on-line yearly. I examine the earnings document to verify they didn’t miss a 12 months of labor (which occurs greater than you assume). And I examine my tax withholding settings.
In the event you don’t ask the SSA to withhold taxes out of your examine (kind W-4V), you may get hit with an enormous tax invoice in April. For a lot of, it’s much less painful to have it withheld month-to-month than to put in writing a giant examine to the IRS annually.
