3 Social Security Mistakes You Probably Don't Even Realize You're Making, and How to Fix Them

If you're like many retirees, Social Security is a key income source for you because, unlike your savings, you don't have to worry about when your benefits will run out.

Unfortunately, many people make mistakes that cost them when it comes to their benefits. In fact, here are three mistakes you're probably making that you may not even realize.

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1. Over-relying on Social Security

One of the first and biggest mistakes people make is assuming that Social Security will do more for them than it actually will.

If you expect that most or all of your income will come from Social Security and you don't have a lot of extra money saved in retirement plans, this can be a big problem.

You could find yourself struggling to live on around 40% of your pre-retirement income, which is all the benefits are supposed to produce. You should make sure to invest in your 401(k) or IRA to avoid this outcome.

If you're already retired or close to it and don't have much time to invest, you should likely downgrade your standard of living ASAP upon retiring if you're relying too much on Social Security. Otherwise you could find yourself facing huge financial shortfalls that derail your long-term retirement planning.

2. Failing to coordinate benefits with your spouse

Failing to coordinate with your spouse on benefits is another major mistake, as your decisions affect them.

For example, if you're a higher earner, your spouse can't claim spousal benefits until you claim your retirement benefits, so you need to take that into account when you decide what claiming age makes sense.

A higher earner who claims benefits early will also shrink Social Security survivor benefits, so you have to think about the effect this could have on your spouse if you pass away first.

Don't make your decisions with just your own needs in mind -- think about how to optimize combined lifetime income for both of you.

3. Overestimating what COLAs can do for you

Finally, if you're assuming that Social Security COLAs will give you enough extra income each year to maintain your buying power in the face of inflation, that's another major mistake.

Your buying power is declining over time with Social Security, according to research from the Senior Citizens League. In fact, benefits have lost around 20% of buying power since 2010 because the COLA formula underestimates how much retirees spend in expensive, high-inflation areas like healthcare.

You need to adjust your spending each year based on what your budget actually allows, while avoiding debt and not taking too much out of your retirement accounts.

Fortunately, avoiding these three mistakes is easy and can help you ensure you're on track for a secure future.

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