Social Security benefits are typically among the most critical sources of income for anyone approaching their golden years. Unfortunately, many retirees make common mistakes that can significantly reduce monthly payments. Knowing these in 2025 is more important than ever to make sure you receive the most out of your benefits and avoid unrequired financial strain.
1. Taking benefits too early
The most common mistake retirees make is applying for Social Security benefits before their Full Retirement Age (FRA). Although benefits can be taken as early as age 62, taking the benefits early could permanently reduce the monthly benefit amount by up to 30%. For example, if your full benefit amount is $1,000 per month at FRA, taking it at 62 may reduce it to $700. That reduction is for the rest of your life, though, so that amounts to thousands of lost dollars over time.
2. Not understanding Full Retirement Age
Many retirees are unaware that their FRA varies based on their birth year. For those born between 1943 and 1954, the FRA is 66 years old. For individuals born in 1960 or later, it increases to 67. Miscalculating this age can lead to premature claims and subsequent financial losses. It’s essential to understand your specific FRA to make informed decisions about when to claim benefits.
3. Overlooking the Earnings Test
Retirees who work and simultaneously collect Social Security before attaining FRA may be subject to the earnings test. In 2025, for every $2 earned above $23,400, $1 in benefits will be withheld. This rule tends to discourage continued employment and could result in less overall lifetime earnings. Once you reach your FRA, the earnings test becomes more lenient, allowing higher earnings without a loss of benefits.
4. The “Widow’s Scam”
Widows and widowers have special options when it comes to Social Security benefits, but most of them make the error of filing for both survivor and retirement benefits at the same time. The Social Security Administration pays just the higher of the two amounts, so filing for both means missing out on a significant possible income. Understanding how survivor benefits work is quite crucial in maximizing payouts during retirement.
5. Failing to report changes
Beneficiaries are required to report any changes in income or circumstances that could change their Social Security payments. Failure to report can lead to overpayments, which the SSA will demand repayment of later. This can lead to financial stress and hardship for the retiree who may not have budgeted for such a demand.
6. Not checking earnings records
Checking the record of your earnings at the SSA is a vital step many retirees often overlook. Errors in your earnings record will decrease benefit calculations when you eventually retire. The “My Social Security” account allows you to view your earnings history and see whether it’s accurate before applying for benefits.
7. Missing out on delayed retirement credits
While many claim as soon as they can, delaying retirement can significantly increase monthly payments. For every year you delay taking benefits past your FRA until age 70, you get a bump up in your benefit by about 8% per annum. That can make for a substantially higher check in retirement and something most impatient people wanting to get started with receiving cash ignore.
8. Trusting SSA advice only
Many retirees believe that the information emanating from the SSA is gospel, but this may not be necessarily so. The SSA staff gave out bad or misleading information on several occasions regarding the benefits of beneficiaries and choices. Claimants will have to make proper research and consult experts in financial advice while making these decisions pertaining to claiming Social Security.
Navigating Social Security can be complex and fraught with pitfalls that may significantly impact your financial well-being in retirement. Knowing these common mistakes, claiming too early, misunderstanding your full retirement age, or failing to report changes, you can take proactive steps to maximize your benefits and ensure a more stable financial future in 2025 and beyond. Taking the time to learn about these things will pay off in the end with more money in your monthly paycheck and peace of mind during your retirement years.
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