Understanding Social Security Mistakes Retirees Make

Every year, retirees make significant errors when applying for Social Security, which can end up costing them a considerable amount in lifetime income—an average of around $182,000, according to various reports.

“Social Security is one of the most crucial financial choices for many Americans,” notes Tyson Tucker. “The gap between optimal scenarios and poor decisions can amount to hundreds of thousands of dollars. Yet, it’s curious how most individuals plan their summer vacations more thoroughly than they do their Social Security strategy.”

Tyson and his brother Ryan founded BOSS Retirement Solutions, a financial advisory firm in Utah that has guided over 50,000 families in their retirement preparations.

Many people underestimate the role Social Security plays in their overall lifetime income, which is a common pitfall in retirement planning that can be easily addressed.

What’s Your Social Security Benefit?

According to the Social Security Administration, the average monthly benefit by 2026 will be roughly $2,071. For couples, that could add up to $3,208 monthly or just under $40,008 annually.

Notably, high earners who claim their benefits after the full retirement age can see annual payments exceeding $100,000. This amount can extend significantly over 20 to 30 years post-retirement.

For instance, a couple drawing $40,000 a year might receive nearly $1 million in Social Security benefits after 25 years, excluding any cost-of-living adjustments.

Tyson remarks, “When people hear $2,000 per month, they think it’s helpful. But when you step back and look at the bigger picture, lifetime earnings might surpass $700,000, $800,000, or even reach the million-dollar mark. Suddenly, the decision to apply for benefits gains a whole new level of importance.”

A Costly Mistake

With so much at stake, one might assume that claiming Social Security is a well-considered decision in retirement. Unfortunately, for many, it becomes an afterthought.

It’s easy to see why—at first glance, it seems straightforward. Choose your age, file your application, and the checks start coming in.

However, the reality is that the process is much more intricate than most realize. Filing your tax return at the wrong time can lead to losing out on a significant sum over your lifetime. Ryan points out, “This is the most frequent blunder we notice. When people don’t file their tax returns at the right time, they end up losing a lot of money… money that rightly belongs to them.”

Many stick to outdated advice when deciding when to file, like “wait until you’re 70 for the largest check” or “take benefits early just in case.” Such common suggestions often ignore crucial factors like income, savings, life expectancy, and marital status.

Everything is Connected

Interestingly, many don’t realize that when to apply for Social Security also impacts much more than just the benefits themselves.

Tyson adds, “The timing of your application can affect your benefit size as well as your taxes, IRA and 401K withdrawals, Medicare premiums, and even spousal benefits. All of these pieces are interconnected.”

Ryan reiterates, “Most folks have no idea how many moving parts there are. Social Security, taxes, Medicare, retirement accounts—they’re all intertwined. If you focus solely on one aspect, you could overlook significant implications.”

Free Social Security Analysis for Utah Families

The Tuckers emphasize that the ideal time to strategize for Social Security applications is about two to five years before becoming eligible. At that stage, there’s still room to adjust income, manage taxes, and explore various scenarios. Once benefits are applied for, the decision is generally set.

BOSS Retirement Solutions provides personalized Social Security analysis at no cost for Utah families. This unique analysis focuses on:

• The optimal age for receiving maximum Social Security income.
• Ways to minimize or eliminate taxes on benefits.
• Coordination of Social Security filings with IRA and 401K withdrawals.
• Avoiding unnecessary Medicare surcharges.
• Maximizing spousal and survivor benefits.

While many advisors may charge hundreds for such an analysis, the Tuckers offer this service for free, regardless of whether you are a client.

This analysis is particularly beneficial for families within five years of retirement who haven’t yet filed for Social Security and have at least $300,000 in savings.

To set up a free analysis, simply call (801) 990-5055.