U.S. workers appear to have a knowledge gap about Social Security, which could lead to money-losing mistakes once program benefits commence.
Exhibit "A" is a recent T. Rowe Price report from Allianz Life Insurance Company of North America, which states that 53% of Americans say: “They do not know much about Social Security or how it will fit into their retirement plan.” Even so, most U.S. workers aren’t seeking professional guidance on Social Security planning, with only 17% who have a financial adviser saying they’ve discussed “maximizing their Social Security income in retirement” with them.
Why is there a disconnect between Americans and adequate knowledge about Social Security? The public isn't all to blame, experts say.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
“Confusion over Social Security doesn’t come from laziness or lack of information, it stems from the system’s complexity,” said Kevin Chancellor, a financial adviser and certified Social Security claiming strategist in Palm Bay, Fla. “Many folks don’t realize how significant the difference can be between claiming at age 62 versus waiting until 70.”
The ideal age to optimize Social Security benefits could fall anywhere within that range; the right timeline is a unique decision for each individual. “The wrong decision could mean thousands of dollars lost throughout retirement and could even increase the risk of depleting a personal investment portfolio too soon,” Chancellor said.
Add in the nuances of spousal benefits, survivor benefits, taxes on Social Security, and the impact of working while collecting benefits, “and it's easy to see why many people get overwhelmed,” Chancellor noted.
Revealing potential Social Security blind spots
One good way to educate yourself on Social Security and its impact on individual retirees is to separate fact from fiction about program benefits and how they work.
Conducting robust due diligence, preferably assisted by a trusted financial advisor, can eliminate negative surprises. During the review phase, be particularly focused on problematic “blind spots” that, left unaddressed, could trigger costly Social Security withdrawal decisions.
These five program factors should be particularly scrutinized, Social Security experts say.
1. Claiming benefits early out of panic, fear, or without knowledge of the consequences
There are times when it may be necessary for you to claim benefits before hitting your full retirement age (FRA). But be sure you know the consequences of claiming benefits early before you make that decision. Many people don't review the rules thoroughly before making official Social Security withdrawal decisions.
Some people don't plan on claiming benefits early, but end up doing so for emotional or unpredictable reasons. In 2025, worries about the solvency of the Social Security trusts that fund Social Security have led some people to claim benefits earlier than planned, out of fears that if they don't, their benefits could be reduced. But the jury's still out on whether the funds will become insolvent and cause benefits to be cut. Yet, the fear of that happening has led to some panicked withdrawal decisions.
“Many retirees claim benefits as early as age 62, often out of fear that Social Security might 'go broke' or simply because they want access to the money right away,” Chancellor said. “Yet claiming early results in a permanent reduction in monthly benefits, up to 30% less than what they’d receive at full retirement age (FRA).”
Even worse, drawing benefits early can put additional pressure on a retiree’s portfolio to cover income gaps, increasing the likelihood of running out of money later in life.
“With longer life expectancies, that’s a real risk,” Chancellor said. “In many cases, delaying benefits — even to age 70 — can create a much stronger and guaranteed income stream, especially for those in good health.”
2. Not factoring in taxes on Social Security Benefits
Many retirees are shocked to learn that up to 85% of their Social Security benefits could be taxed as ordinary income if they have other retirement income, such as pensions or withdrawals from 401(k)s.
Fortunately, the fix is relatively straightforward. “Consult your CPA and financial advisor before claiming benefits,” said Joseph Patrick Roop, CEO at Belmont Capital Advisors, in Charlotte, N.C. “Strategic income planning, such as timing withdrawals or leveraging Roth accounts, can minimize or even eliminate this tax burden. Also, consider Roth IRA conversions before you start Social Security.”
3. Claiming benefits too early while still working
Claiming benefits before hitting your FRA, while still working, can trigger the Social Security earnings test and a penalty — something retirees overlook.
If you claim early, in 2025, the Social Security Administration (SSA) temporarily withholds $1 of benefits for every $2 earned that surpasses $23,400. In the year when a worker reaches their FRA, the penalty is lower; the worker would lose $1 in benefits for every $3 earned that surpasses $62,160.
By waiting to claim benefits until your full retirement age, you can forego the annual earnings test altogether. Once you've hit your FRA, you are free to earn whatever amount you want and the withheld benefits will be returned to you.
“Withheld benefits are restored once you reach full retirement age, but planning prevents surprises,” Roop added.
Roop said that in addition, many people don't know that if they've already filed, they can suspend benefits and restart at a later date.
Suspending allows benefits to grow by about 8% per year until age 70 through delayed retirement credits, which boosts future income if circumstances change.”
4. Underestimating your lifespan
No one can predict how long they'll live, so it's best to plan for all possibilities.
“People are living longer, and for you to enjoy your golden years, you must account for how long they could last,” said Kimberly Gattis, senior vice president for financial planning at UMB Bank.
The Social Security website has a longevity calculator. Gattis advises meeting with your financial advisor to ensure you have a detailed long-term plan.
“That plan should be tailored to your anticipated income and Social Security benefits, with some added cushion for the unexpected expenses,” she said. “Plan to adjust and recalibrate your spending as time goes on. The biggest factor in ensuring you have enough funds to last throughout your retirement is understanding your cash flow and anticipating your needs.”
5. Neglecting to take funds you’re legally owed as an ex-spouse
Too often, Social Security recipients overlook the ability to collect spousal or survivor benefits and don’t make the calculations needed to ensure that they’re collecting the larger portion.
“If you’re 62 or older, were married for 10 or more consecutive years and are currently unmarried (or remarried at age 62 or older), have been divorced for two or more years, and your former spouse is 62 or older, you can receive a benefit based on the earnings of your ex-spouse,” said Eric M. Steffy, founder and CEO at Federal Solutions Report in Daytona Beach, Florida.
You can contact the Social Security Administration to determine if you're better off claiming your Social Security or spousal, or survivor benefits.
Take advantage of SSA planning tools
To ensure you have the best and most accurate prediction of anticipated Social Security benefits before applying, leverage the help offered by the Social Security Administration.
“Beneficiaries should use safe and approved tools like the Social Security Administration's online benefit calculators,” Gattis said.
Tools such as the My Social Security Retirement Estimate and Early or Late Retirement Calculator have secure access to your account to ensure your benefits estimate is accurate. “These tools also let you see how different scenarios like lifespan and retirement age could affect your benefits amount,” Gattis said.
Related content
-
Crypto Trends to Watch in 2026Cryptocurrency is still less than 20 years old, but it remains a fast-moving (and also maturing) market. Here are the crypto trends to watch for in 2026.
-
Original Medicare vs Medicare Advantage Quiz: Which is Right for You?Quiz Take this quick quiz to discover your "Medicare Personality Type" and learn whether you are a Traditionalist, or a Bundler.
-
Ask the Editor: Capital Gains and Tax PlanningAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on capital gains tax rates and end-of-year tax planning
-
Original Medicare vs Medicare Advantage Quiz: Which is Right for You?
Quiz Take this quick quiz to discover your "Medicare Personality Type" and learn whether you are a Traditionalist, or a Bundler.
-
Time Is Running Out to Make the Best Moves to Save on Your 2025 TaxesDon't wait until January — investors, including those with a high net worth, can snag big tax savings for 2025 (and 2026) with these strategies.
-
4 Smart Ways Retirees Can Give More to Charity, From a Financial AdviserFor retirees, tax efficiency and charitable giving should go hand in hand. After all, why not maximize your gifts and minimize the amount that goes to the IRS?
-
My Adult Child Was Laid Off. Can We Discuss It Without Ruining the Holidays?We asked mental health and financial experts for advice.
-
3 Year-End Tax Strategies for Retirees With $2 Million to $10 MillionTo avoid the OBBB messing up your whole tax strategy, get your Roth conversions and charitable bunching done by year's end.
-
'Politics' Is a Dirty Word for Some Financial Advisers: 3 Reasons This Financial Planner Vehemently DisagreesYour financial plan should be aligned with your values and your politics. If your adviser refuses to talk about them, it's time to go elsewhere.
-
For a Move Abroad, Choosing a Fiduciary Financial Planner Who Sees Both Sides of the Border Is CriticalWorking with a cross-border financial planner is essential to integrate tax, estate and visa considerations and avoid costly, unexpected liabilities.
-
15 Costly Drugs Will Get Medicare Price Cuts in 2027: Will You Save?The Centers for Medicare & Medicaid Services extended a safety net to older Americans by announcing significant price reductions on 15 high-cost prescription drugs, effective in 2027.
