The Biggest Mistakes People Make When Filing for Social Security – and How to Avoid Them
96% of Americans lose an average of $111,000 in their Social Security income due to mistakes made while filing for benefits, according to Forbes. There are over 2,700 rules in the Social Security handbook, so it’s easy for retirees to wind up committing errors. Unfortunately, any mistake made in a filing is irrevocable and will […]
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May 24, 2025 - 16:42
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96% of Americans lose an average of $111,000 in their Social Security income due to mistakes made while filing for benefits, according to Forbes. There are over 2,700 rules in the Social Security handbook, so it’s easy for retirees to wind up committing errors. Unfortunately, any mistake made in a filing is irrevocable and will be codified in their accounts throughout their retirement – until death. Since mistakes are carved in stone, it’s best to avoid them, so prudent preparation should be undertaken before filing.
Key Points
The process of filing for Social Security benefits may appear simple, but failure to research qualifying criteria can lock one into lower benefits than what could have been obtained otherwise.
While some benefits can be changed afterwards, the majority of them are locked in for life, so advanced preparation is advisable prior to filing.
Although there are more, five categories where many people commit filing errors are: Age/Marital Status, Death, Income, Taxes, and Health.
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Age/Marital Status
Age Qualifications: Although one can technically file for Social Security benefits starting at age 62, full benefits do not manifest until age 67 (FRA – Full Retirement Age), with maximum benefits starting at age 70. Benefits will be reduced by 5/9 of 1% per month (6-2/3% per year) for as many as 36 months before full retirement age. Benefits will be reduced by 5/12 of 1% per month (5% per year) for every month claimed early beyond 36 months. The net annual difference can range between 5% and 8%.
Spousal filings: Spouses who are American citizens are also entitled to file for retirement benefits once they reach 62. However, if 50% of the higher earning spouse’s benefit exceeds that of the lower earning one, that spouse can file for the spousal benefit and eschew their own individual benefit – but they can only choose one. Even an ex-spouse can file for the 50% benefit if the marriage lasted 10 or more years, and this can be concurrent with the current spouse’s benefits, provided the ex-spouse is still unmarried. If the couple does not have an urgent need for benefits income, it can behoove them for the larger earner to withhold filing until age 70 for maximum benefits and for the lower earner to file earlier for nominal income – and then switch to the higher 50% spousal benefit, based on the age 70 maximum benefit – afterwards.
Death
Survivor benefits: A widow or widower can file for Survivor’s benefits starting at age 60, provided they have not remarried.. The surviving spouse would be entitled to the deceased’s full Social Security benefit amount. Benefits may be reduced if the survivor files for their own individual benefits, so one should calculate the difference before deciding to change filing status.Surviving Children: Children under the age of 18 are also eligible to receive Social Security survivor’s benefits if a parent has died. Children with medical disabilities diagnosed prior to reaching age 22 can continue to receive benefits, regardless of age.
Income
40 Credit Point Threshold: In order to qualify for Social Security benefits, one must have contributed a minimum of 40 credits via FICA tax withholding into the Social Security fund. This is equivalent to roughly 10 years of gainful employment. Basically, one receives a credit point for every fiscal quarter of employment and FICA tax withholding. The 40 credit point accumulation is cumulative, so it need not be consecutive, which allows for those who do freelance work to still qualify.Income Amount Cap: There is a $22,320 limit on wages for Social Security benefits below the FRA of 67. Social Security will deduct $1 from benefit payments for every $2 of earnings above the earned income annual limit. However, other key types of retirement income, such as pensions, annuities, investment income, interest, veteran benefits or government and military benefits are exempt from the limit amount.
Taxes
Tax Bill: Although the new tax bill was approved in the latest House of Representatives’ vote, it has yet to pass the Senate. While it does not end Social Security taxes, it does offer an additional $4,000 deduction for retirees over age 65. This is anticipated to effectively erase Social Security income taxes for those with total gross earnings over $75,000. However, until that bill becomes law, Social Security benefits are still considered part of gross income for tax purposes, and up to 85% of the benefits may be subject to tax, depending on total income.Suspending benefits: The Social Security benefit impact on income taxes can potentially bump up a retirees tax bracket, especially if MRD, i.e. Minimum Required Distribution on IRA and 401-K retirement accounts are triggered when age 72 is reached. If the Social Security benefit is not required for any time period after benefits have commenced, a recipient can choose to suspend benefits at any time prior to reaching age 70. During that time, delayed retirement credits can accrue by as much as 8% per year. Payments will automatically resume at age 70, but the recipient can opt to delay further and resume anytime afterwards for maximum benefits.
Health
5 Year Rule for Disability: In order to file for Social Security Disability Insurance (SSDI), there is a “5 Year Rule Recent Work Test” qualification needed. The 5 Year Rule requires that anyone filing for disability insurance worked for 5 out of the last 10 years with FICA withholding immediately prior to diagnosis of the disability. While not required to be consecutive, the Social Security Administration is tasked with making sure that only recent contributions to the Social Security Fund are an eligibility prerequisite.Medicare: As the Federal medical insurance program that is also funded via FICA withholding, Medicare eligibility starts at age 65 for those with at least the same minimum 40 credit points for Social Security benefits eligibility. The filing period begins 3 months prior to one’s 65th birthday, and expires 3 months after. Those receiving medical insurance from an employer are advised to at least file for Medicare Part A before the expiration period. One needs to research what the premiums are for the different tiers of coverage and the variables of Part B, C, D, et al., which can be complex.
