5 Social Security Decisions That Can Lead To Disaster If You Get Them Wrong

Social Security is a lifeline for many recipients. In fact, over 75 million people rely on these benefits to help make ends meet. But as important as Social Security is, it’s all too easy to make mistakes when claiming it.

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If you’re making a plan for your benefits, awareness can go a long way. Here are some top Social Security decisions that could be financially disastrous if you’re not careful.

1. Claiming Benefits Too Early

Most people can start collecting Social Security benefits at age 62, but the earlier you start collecting, the smaller your monthly payout will be. Once you reach full retirement age (FRA), your monthly paycheck will increase.

Here’s an example of how much a $1,000 monthly benefit might decrease if you start collecting at age 62 compared with the FRA.

• If your FRA is 66, you’d receive $750 (25% reduction).

• If your FRA is 66 and 6 months, you’d receive $725 (27.5% reduction).

• If your FRA is 67, you’d receive $700 (30% reduction).

Delaying benefits until age 70 will get you the highest possible amount.

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2. Ignoring Taxes in Your Retirement Plan

Many forms of retirement income are taxable, including Social Security. Up to 85% of your benefits are taxable, but the exact percentage depends on your annual income and filing status.

When making your retirement plan, factor in those taxes, as they can have a major impact on your future financial stability. Be sure to also consider state taxes, as these might apply (though it’s uncommon).

3. Working While Receiving Benefits

Collecting Social Security while still working can become problematic if you’re not aware of the income limits. Earn too much, and some of your benefits will be withheld.

For those under full retirement age, the earnings limit is $24,480. For those who’ve reached full retirement age, the earnings limit is $65,160 in 2026.

4. Ignoring Longevity and Health Implications

The average American lives 79 years, per the Centers for Disease Control and Prevention. This means someone who retires at age 62 will need enough money to support them for at least 17 years.

But your life expectancy may be higher depending on your health and other factors. Failing to account for this can lead to financial strain later on. If you anticipate a long, healthy retirement, delaying benefits might be for the best.

5. Not Understanding Spousal and Survivor Implications

Social Security has a lot of rules regarding spousal and survivor benefits. Choosing to ignore these can cause undue stress if you’re not careful.

One mistake is claiming early without considering your spouse. “If you collect early, your benefit is lower. If you then die, your survivor’s benefits are also lower for your spouse’s lifetime because you claimed early,” said Grant Meyer, CFP, BFA, financial advisor at TruMix Advisors.

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This article originally appeared on GOBankingRates.com: 5 Social Security Decisions That Can Lead To Disaster If You Get Them Wrong