Retirement is the time to kick back, relax, and enjoy the hard-earned fruits of your working years.
If you enter retirement blindly without understanding your Social Security benefits, you could be in for a rude awakening.
Avoid these bad habits that will blow your Social Security payments and make retirement unnecessarily stressful.
Miscalculating Inflation
Not calculating the impact of inflation on your Social Security payouts could cost you in the long run. Benefits may be subject to a cost of living adjustment if the Social Security Administration deems it necessary due to inflation.
However, your monthly expenses may increase more significantly than the adjustment covers. Inflation can cause daily essentials like food and eyeglasses to become overpriced beyond belief. Budget conservatively and factor inflation into your calculations while preparing to retire.
Not Budgeting Properly
Be realistic about how your lifestyle may need to change post-retirement. Accurately estimating how much Social Security you qualify for can help you budget appropriately.
You might shift aspects of daily life to save, like eating out less or switching from name-brand to generic products at bulk discount stores. Start having these conversations before retiring so you aren’t in for a nasty surprise if your benefits don’t cover monthly expenses.
Ignoring Overpayments
Sometimes, you may find yourself in a situation where the Social Security Administration asks you to repay a portion of your benefits. Repayment demands usually occur when they send you more money than they owe you.
Many things can cause overpayments, from income discrepancies to changes in your marital status. If you receive a notice of repayment from the Social Security Administration, call them to confirm how much you owe and why.
Filing for Benefits As Soon As You’re Eligible
Don’t make the mistake of filing for social security benefits as soon as you’re eligible. Most people can start receiving payments as early as 62. However, the Social Security Administration reduces benefits if you file before reaching the full retirement age.
Your birthday dictates the full retirement age that applies to you, so familiarize yourself with the guidelines before filing. If possible, wait to take out Social Security until you can receive the full benefits without penalties.
Forgetting to Factor in Lifespan
Remember to factor in varying lifespans when estimating your Social Security benefits. According to the Centers for Disease Control and Prevention, the U.S. life expectancy increased from 76.4 to 77.5 years in 2022. As the average lifespan gets longer, you must adjust your expectations for how long your benefits will last.
Not Estimating Benefits Before Retiring
Retiring without knowing what benefits you’ll receive is a bad idea. After filing, you may be disappointed by what you qualify for and experience an unpleasant shock. Take the time to do a regular financial checkup so that you have clear expectations for post-retirement life.
Retiring Too Early
You may be tempted to stop working and kick your feet up once you take out Social Security payments. However, you could be missing out on significant earnings. Benefits are partially determined by your 35 highest-earning years, so it could be beneficial to continue working past the age you’re eligible to retire.
Relying Solely on Social Security Representatives
While Social Security representatives can help you understand the benefits system, you shouldn’t rely solely on their advice. Instead, seek the assistance of a professional financial advisor. These experts will work on your behalf to smartly manage your payouts and make them go further.
Not Considering Different Options for Claiming Benefits
Maximize your Social Security benefits by researching your options for claiming them. There are many ways to receive payouts, from spousal to survivors’ benefits. A financial advisor can advise you on filing for social security to earn as much as possible.
Earning Too Much While Filing
If you file for Social Security as soon as you’re eligible while continuing to work, you could end up in quite the pickle. Earning too much income while taking out Social Security before your full retirement age results in payment deductions. You won’t receive the entire amount you’re entitled to, so be cautious about earned income as you prepare for retirement.
Not Planning With Your Spouse
Claiming Social Security benefits can become complicated if you’re married. Depending on your financial situation, it may make sense for one spouse to file before the other. Having one spouse file first can help you stay financially secure until the other is eligible for the maximum benefits.
Misunderstanding the Survivors’ Benefit
Widows and widowers may file for Social Security payments as early as 60, but you shouldn’t simultaneously file for spouse and personal benefits. Since Social Security only pays the higher benefit, you could lose money by claiming your benefits too early. If the survivor’s benefit is higher, wait to file until your full retirement age to receive as much as possible.
Not Saving for Medical Expenses
Many should pay more attention to how much they set aside for medical expenses and long-term care. Your healthcare costs will likely increase as you age. Start saving sooner rather than later to set yourself up for success if you need extensive medical care after retirement.
Make your money go further by moving somewhere retirement-friendly
One of the best ways to maximize your Social Security benefits is to live within your means. If you crave a change of scenery post-retirement, there’s no better time to move somewhere new.
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Retirement is the perfect excuse to plan an epic vacation. Find the best travel options for seniors to save big on everything from Alaskan cruises to European train rides.
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Elise Armitage is an entrepreneur and founder of What The Fab, a travel + lifestyle blog based in California. At the beginning of 2019, Elise left her corporate job at Google to chase her dreams: being an entrepreneur and helping women find fabulous in the everyday. Since then, she’s launched her SEO course Six-Figure SEO, where she teaches bloggers how to create a passive revenue stream from their website using SEO. Featured in publications like Forbes, Elle, HerMoney, and Real Simple, Elise is a firm believer that you can be of both substance and style.
