5 Social Security Oversights That Could Cost You Thousands | Personal Finance

March 14, 2021

3. Waiting past full retirement age to claim spousal benefits

If you're claiming Social Security benefits based on your own income record, it may make sense to wait past your full retirement age to start taking benefits. If, on the other hand, you're claiming based on your spouse's benefits, you get no benefit for waiting beyond your full retirement age to claim.

This causes married couples of similar ages who have vastly different earned incomes to face a potential quandary. In order for you to claim spousal benefits, your spouse also has to have begun claiming benefits based on his or her own earnings record. This combination makes it less worthwhile for the primary breadwinner spouse to wait to collect benefits if the spouse is expecting to take spousal benefits.

4. Taxes on Social Security benefits are not inflation adjusted

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Originally, Social Security benefits were not taxed. That changed in 1984, when a 1983 law went into effect that began taxing Social Security benefits once an individual's combined income passed $25,000. Fast forward to 2021, and the income level where Social Security starts to get taxed remains the same $25,000.

If that $25,000 level had been adjusted for inflation, you could have a smidge above $64,000 in 2021 income and still not see your Social Security benefits taxed. Instead, not adjusting those brackets for inflation puts far more people's Social Security income in the path of taxes. That oversight easily costs even moderate income retirees thousands of dollars of spendable income over the course of their retirements.