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 assumed I knew the system in and out. 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 here are the 5 dumbest errors I see retirees make — and the way I averted them.
1. Falling for a standard tax delusion
Most individuals assume that since they paid taxes on their wages earlier than they went into Social Safety, their advantages shall be tax-free.
That’s a logical assumption, however solely true if in case you 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 possible set off a tax formulation generally known as provisional revenue.
The IRS takes your adjusted gross revenue, 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 at the 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
After I informed my buddies I used to be serious about delaying my advantages declare till I hit age 70, all of them mentioned the identical factor: “However what in case you die?”
They pulled out napkins and calculated my breakeven age — the age I’d should reside to for the larger checks to beat the smaller, early checks. Normally, the mathematics says you must reside to about 80 to return out forward.
Right here’s the issue with that math: It assumes you’ll die younger.
In accordance with the Social Safety Administration’s actuarial tables, in case 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 reside to 90, you price your self tens of hundreds of {dollars} in assured, inflation-protected revenue. Except you’ve gotten a critical well being challenge, betting by yourself early dying is a foul monetary technique.
3. Working an excessive amount of (the earnings check)
I’ve a good friend who claimed advantages at 63 however saved his consulting gig. He thought he was double-dipping. Then he obtained a letter from the SSA telling him they have been withholding his checks.
He violated the earnings check.
In 2026, in case you declare advantages earlier than your full retirement age, you possibly can 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 ceaselessly. They finally recalculate your profit once you hit full retirement age to pay you again, however that doesn’t make it easier to pay the electrical invoice at the moment. In the event you plan to maintain working, don’t declare early in case you 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 verify. But when the upper earner took a decreased verify at 62, the surviving partner is caught with that decreased 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 the next 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 residing adjustment (COLA). In 2026, it’s 2.8%. However Medicare Half B premiums additionally rise, they usually’re deducted straight out of your verify.
I verify my private “my Social Safety” account on-line yearly. I verify the earnings report to verify they didn’t miss a yr of labor (which occurs greater than you assume). And I verify my tax withholding settings.
In the event you don’t ask the SSA to withhold taxes out of your verify (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 write down an enormous verify to the IRS every year.
