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 assumed I knew the system in and out. However as soon as I moved from the theoretical facet of the desk to the retiree facet, I spotted that the system is full of 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 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 if in case you have little or no different revenue.
You probably have different revenue sources — like a pension, withdrawals from a 401(ok) and even part-time work — you’ll possible set off a tax components 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 have been set within the Nineteen Eighties and by no means adjusted for inflation. They have been meant to tax the wealthy, however right this moment, they hit the center class. Be ready for this tax invoice as a result of it catches many of us off guard yearly.
2. Obsessing over the breakeven age
Once I informed my associates I used to be enthusiastic about 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 dwell to for the larger checks to beat the smaller, early checks. Normally, the mathematics says it’s important to dwell to about 80 to come back out forward.
Right here’s the issue with that math: It assumes you’re going to die younger.
In line 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). When you’re a lady, it’s almost 21 years (age 86).
When you declare early at 62 to “get yours” after which dwell to 90, you price your self tens of 1000’s of {dollars} in assured, inflation-protected revenue. Except you might have a severe well being concern, betting by yourself early dying is a nasty monetary technique.
3. Working an excessive amount of (the earnings check)
I’ve a good friend who claimed advantages at 63 however stored his consulting gig. He thought he was double-dipping. Then he acquired a letter from the SSA telling him they have been withholding his checks.
He violated the earnings test.
In 2026, when you declare advantages earlier than your full retirement age, you may 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 perpetually. They finally recalculate your profit if you hit full retirement age to pay you again, however that doesn’t show you how to pay the electrical invoice right this moment. When 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 test. But when the upper earner took a decreased test at 62, the surviving partner is caught with that decreased quantity for the remainder of their life.
If you’re the excessive earner, you aren’t simply delaying for your self. You’re basically shopping for the next lifetime revenue to 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 straight out of your test.
I test my private “my Social Security” account on-line yearly. I test the earnings document to ensure they didn’t miss a 12 months of labor (which occurs greater than you assume). And I test my tax withholding settings.
When you don’t ask the SSA to withhold taxes out of your test (type W-4V), you will 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 an enormous test to the IRS annually.
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