5 Social Security Mistakes You Probably Don't Even Realize You're Making

If you put nothing away for retirement, I can tell you, to the last penny,
how much you will have when you retire: nothing.
-- John Bogle  

It's smart to heed the words of John Bogle because he was an iconic index-fund pioneer with a long and well-regarded career -- and he knew a thing or two about money and retirement. Permit me to quibble with him a bit, though: Most of us in America will have some kind of income in retirement -- from Social Security.

Image source: Getty Images.

Still, Social Security isn't likely to be sufficient. Read on to learn how to make some smart moves regarding your benefits and how to avoid some regrettable ones.

1. Expecting too much from Social Security

Do you think that Social Security will provide enough money so that you can live comfortably in retirement? If your answer was yes, here's a little wake-up call: The average monthly Social Security retirement benefit was $1,837 as of June, 2023, which amounts to about $22,000 over a year.

That's just an average, though. Millions of people are receiving less and millions are getting more -- but very few are collecting $50,000 or more.

You can get a much clearer idea of what you can expect to collect by setting up a "my Social Security" account at the Social Security Administration (SSA) website. Once you do, you'll be able to see estimates of how much you may collect in the future, depending on various factors, such as when you start collecting.

Once you have at least a rough idea of what to expect from Social Security, you can draft a retirement plan and start saving and investing for your future -- perhaps using simple and powerful index funds.

2. Not correcting errors in your earnings record

While you're viewing your Social Security account, take a look at the SSA's record of your earnings to make sure it's correct. If you spot any errors, look into having them fixed -- because your benefits are based on your earnings history. Correcting an error can lead to fatter benefit checks.

3. Not strategizing about when to claim your benefits

Another big mistake is starting to collect your Social Security benefits without putting some thought into when it's the best time to do so. There's no single perfect age at which to start since we each have different circumstances and needs. Here are some things to know:

• Each person has a "full retirement age" when they can start collecting the full benefits to which they're entitled, based on their earnings history. This age is 66 or 67 for most people.
• You can start collecting your Social Security retirement benefits as early as age 62. Your checks will be smaller, but you'll receive many more of them than if you'd waited longer.
• You can delay starting to collect benefits up to age 70, which will make your checks larger.

Here's a table showing what percentage of your full benefits you'll receive, depending on when you start collecting:

Source: Social Security Administration. 

You can make a big difference in the size of your benefit checks by carefully timing when you start. It can be perfectly sensible to begin early if you stand a decent chance of living a shorter-than-average life or you simply need that income soon -- perhaps due to a planned or unplanned early retirement. If you stand a decent chance of living a longer-than-average life and are able to delay starting to collect, it can be a powerful move.

4. Not coordinating with your spouse

If you're married, be sure to have a coordinated plan for when each of you will start your Social Security checks rolling in. A key consideration is that when one of you passes away, the survivor will only be collecting one of the two checks your household was receiving -- whichever is larger.

So it can be smart for the higher earner to delay up to age 70, if possible. The lower earner might start collecting early if that income is needed or can also maximize their benefit by delaying.

5. Not considering your big picture

Finally, be sure to consider your big picture as you plan for retirement and include Social Security in your planning. For example, if you want maximum Social Security benefits, you might try to delay collecting until age 70 -- and you might tap other retirement assets more until age 70 in order to do so. Or if you're trying to retire early but will be on the hook for health insurance costs until you can start Medicare at age 65, you might tap your Social Security early, in order to help with that.

Remember the words of John Bogle, too. You may not end up with no income at all if you don't save and invest for retirement, but you won't end up with much. So start learning more about how to build a secure financial future.