The Biggest Social Security Mistake People Make (And How You Can Avoid It)

Social Security helps millions of Americans make ends meet in retirement. That makes it surprising to see so many people make a basic mistake that can cost them thousands in benefits over the long run.

In the following segment from their video guide to investment planning, Motley Fool director of investment planning Dan Caplinger talks with Fool markets/IP bureau chief Mike Klesta about this crucial mistake. Dan notes that he sees too many people take their Social Security benefits at the earliest possible moment, taking reduced payments at age 62 rather than waiting longer to reap higher monthly benefits. Dan points out that in many cases, these retirees have other potential income sources to tap, including company pensions and retirement investing accounts like IRAs and 401(k)s. By using them more extensively, people could wait and increase what they get from Social Security. Yet Dan points out that it's hard for many to see the future impact of their Social Security choices, and so it's uncertain whether most people will stop making this mistake.

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Read/Post Comments (12) | Recommend This Article (19)

Comments from our Foolish Readers

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  • Report this Comment On February 24, 2014, at 9:47 AM, zxzxzx wrote:

    do the math, calculate your life expectancy, compare your ss numbers with early,62, vs at 70. the cross over point is about 80-81. so bet on the come and take it early not late. the feds want you to take it late to ensure less payout.

  • Report this Comment On February 24, 2014, at 11:43 AM, RJFL99 wrote:

    Everyone's different. My life expectancy isn't that long, so I'll take it the minute I'm eligible. It would be ridiculous for me to spend down my kid's inheritance to collect social security for a couple of months then kick off, leaving them nothing. These clowns will mislead a lot of people who will listen to them and do exactly the wrong thing for their own situation. There is no one-size-fits all.

  • Report this Comment On February 24, 2014, at 2:14 PM, TMFBreakerRob wrote:

    It may not be a mistake at all.

    If Congress changes the rules by implementing "needs testing", a bunch of us could no longer if eligible for social security payments or our benefits could be greatly reduced.

    Yeah, it's an "if", but the concept gets an awful lot of discussion, lending credence to the idea of shafting some of us. I guess it gets down to whether social security is "welfare" or a "return for what you put in".

  • Report this Comment On February 24, 2014, at 4:58 PM, al8603 wrote:

    My wife and I will take our SS when she reaches retirement age in 10 years. She is a year younger so I will collect one year after my early eligibility. I also have a pension and we have some savings.

    All told we expect to net monthly about 6k. Or 72k per year. This is enough to provide us a very very comfortable life because we will retire outside the US in a country where the costs are far less than in the US and where amenities are similar enough that we have determined we can live out our lives there. We determined this by visiting frequently at various times of the year and have stayed for a month at a time and by talking with other American expats who've been living there for years.

    Not for everyone I know but, it is an option. There are many places that Americans can retire to where the costs are nowhere near those in the US.

  • Report this Comment On February 24, 2014, at 8:22 PM, wvowell wrote:

    This video had absolutely no substance!! Caplinger why didn't you explain your belief that taking later is better.

    EXPLAIN why using other income sources is better than early Social Security.

    I have been calculating my a** off to determine which is better early or later. And so far early seems to be better. It takes 20 years to break even (see zxzxzx above.)

  • Report this Comment On February 25, 2014, at 1:02 AM, WalterPidgeon wrote:

    If you know definitely, positively,without any question that you will live past 78 years old then hold off until you can get full monthly benefits.

    However if you are not definitely positive, there is doubt about your mortality then:

    TAKE YOUR SS ASAP..........

    As the old adage goes if you don't use it you WILL lose it. The government is betting you LOSE.

  • Report this Comment On February 25, 2014, at 7:50 AM, inparadise wrote:

    The video ignores return on assets retained in your accounts when you take SS early and draw down less from the IRAs. This calculator lets you plug in your anticipated returns on investments not spent as part of the decision making process: For us the break even came at about 5%. If we make more than 5% it is better to take SS at 62, if less 70. For me the only reason to take SS at 70 is the maalox effect. It may make you sleep easier if at least one of your income streams is independent of your investment decisions.

  • Report this Comment On February 25, 2014, at 7:55 AM, fnurl wrote:

    I didn't read the article because I don't read articles on why you shouldn't take SS early because these putz' don't know what they're talking about. Nobody knows their life expectancy. I took SS at age 62, even though I was working and didn't need it. Up until age 65 I had to repay $1 for every $3 I earned. This restriction was eliminated when I reached 65. I invested every penny of SS, pretending it did not exist. The ROI over the years has returned much more than I would have earned had I waited until a later age. I have been doing this for 13 years and have built a very nice nest egg on just my SS investments. My best friend, a widower, decided to wait until he was at least 65 before he collected. He died at age 64, never having received a penny from all of his hard work and contributions over the years. Take it when you can.

  • Report this Comment On February 25, 2014, at 11:52 AM, FrankPry wrote:

    I did the math. My break-even point is 82 and a couple months. zx.. is right Let the writers of these columns wait until they are 70 to retire, I need their contributions to SS so I can get my check!!!! If I was still waiting to collect until I was 65, and died, -- I would get ZERO --- I'd be dead.. I want the money I paid in back! If I waited, I'd probably be 1) dead from the stress of working or 2) be living in an old age home wondering who I am and who the heck these people around me are....

  • Report this Comment On February 25, 2014, at 2:13 PM, robspros wrote:

    Another oversimplification to get attention.

    Already many good comments about doing the math; in addition consider investing the money and the break even point could be in the nineties. Another way to look at this is leave your money in your IRA, how much will it grow. If your income is low your taxes on SS will be low. It's all in the numbers, an individual calculation.

    Also your heirs can't inherit a monthly SS payment but they certainly can inherit the stack of money you set aside.

  • Report this Comment On February 25, 2014, at 3:05 PM, bkmobal wrote:

    It did not much matter with me. Took it at 62. I am retired civil service and the Government took over half my social security payout back under the offset penalty. Was supposed to get $566.00 but wound up with $230.00 a month. Wife is also retired Civil Service but only had 38 quarters under Social Security so she is offset 75 percent drawing on mine not worth filing for.

    Just read NESTOR vs FLEMING supreme court ruling. Not guarenteed social security only people from other countries under Totalization agreements.

  • Report this Comment On February 25, 2014, at 5:53 PM, RxPro wrote:

    Haha thanks Dan, have fun retiring at 70. I'll send you a postcard from the Caribbean thanking you for letting me cash out your SS money and keep more of my investments intact.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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