When you're retired, you have to rely on your savings, Social Security, and any pension benefits available to you. Most seniors have limited incomes, which means protecting your money is essential to maintain as much financial security as you can.

That's why it's so important to avoid costly mistakes that could reduce your savings, reduce Social Security, or make your medical care cost more. In particular, here are three mistakes you must avoid as a senior.

A mature couple reviewing paperwork on a table using a calculator.

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1. Not taking required minimum distributions

If you have money in a 401(k), traditional IRA, or certain other tax-advantaged retirement accounts such as a 403(b) or 457(b) plan, you must take required minimum distributions (RMDs) starting at age 70.5.

RMDs are withdrawals from your retirement account. There are RMD tables made available by the IRS to tell you the percentage of funds you must withdraw based on your age and life expectancy. The IRS also provides a worksheet to use to calculate required distribution.

Your first RMD must be taken no later than April 1 in the year after you turn 70.5 years old, so if you reach that age in 2018, you have until April 2019 to start taking distributions. In all subsequent years, you must take RMDs by the end of the calendar year.

If you take your first distribution in April the year after you turn 70.5, you still have to take your second distribution by the end of that calendar year. This could mean you'd have two RMDs to take in 2019.

You absolutely must follow the rules for RMDs, as the penalty for not taking a required minimum distribution is equal to 50% of the value of the money you were supposed to withdrawal. Don't forget your RMDs and cost yourself a fortune. 

2. Not determining the best Social Security claiming strategy

Most seniors rely on Social Security as a significant portion of their income. That means you need to maximize your benefits. One way to do this is to be strategic about when you claim them.

The Social Security Administration sets a full retirement age (FRA) based on your birth year. If you retire before FRA, benefits are reduced by 6.7% per year for the first three years before FRA, and for each prior year there's an additional 5% annual reduction. If you wait until after FRA, benefits are increased by around 8% annually. Calculate how long it would take to break even if you delay claiming benefits. If you'll likely live longer, waiting to claim could be beneficial.  

Claiming benefits on a spouse's work record may also be an option if you're married, widowed, or divorced after a marriage lasting at least 10 years. This could be a major advantage if your spouse earned more than you or if you claim a spouse's or survivor's benefit at age 62 while leaving your own benefit unclaimed until FRA.

There are 81 different ways for married couples to claim Social Security benefits and the Social Security Administration doesn't do a very good job explaining options. In fact, reports show widows missed out on $132 million in benefits because the Social Security Administration failed to explain how survivor benefits work.

Talk to a financial professional or research options carefully regarding how best to claim benefits because choosing the wrong claiming strategy is a major mistake that costs you throughout your entire retirement.

3. Not signing up for Medicare on time

Most people become eligible for Medicare at the age of 65 and, while you'll typically be auto-enrolled if you were signed up for Social Security at least four months before your 65th birthday, not everyone gets covered automatically.

If you become eligible and don't buy Medicare Part A coverage at age 65, you'll be penalized with a monthly premium that's 10% higher when you get covered. You'll need to pay this 10% premium for twice the number of years you could've been signed up for Medicare Part A but weren't. If you signed up at age 67, you'd pay a higher premium for four years -- twice the two year period between ages 65 and 67.

If you fail to sign up for Medicare Part B coverage when you become eligible, you'll also face a penalty equal to 10% for each 12-month period you could've obtained coverage but didn't. If you were two years late, your premiums would be 20% higher. These elevated premiums last the entire time you're covered.

When you become eligible for Medicare for the first time, there's a seven month period when you get to sign up for benefits. You can sign up starting three months before you turn 65 years old, during the month you turn 65, and three months after the month you turned 65.

There are some exceptions to general signup rules, such as if you're still working and covered by a group plan or if you were located in a natural disaster zone during your required signup period. But, for the most part, if you miss your signup date, you'll be left without insurance until the next general enrollment period and have to pay a penalty when you get covered.

Keep on top of your finances to avoid penalties

There are lots of rules to follow when it comes to Medicare, Social Security, and retirement accounts. By keeping on top of what's expected, you can avoid mistakes that trigger penalties -- and can keep your hard-earned money and benefits to fund your lifestyle during your senior years.