When it comes to saving for retirement, many Americans are unprepared and misinformed, especially about how Social Security works. With nearly 70 million people relying on it, making a mistake with Social Security can cost you a lot in the long run. Some people even risk losing out on benefits they’ve earned — simply because they didn’t understand how the system works.
Let’s look at the most common retirement mistakes and how you can avoid them.
Why Financial Knowledge Matters for Retirement
Saving for retirement is one of the most important parts of financial planning. But many people think Social Security will be enough to support them in old age — and this is not true. Social Security is only one source of income, and it may not cover all your future expenses.
The Social Security Administration (SSA) recommends creating a diverse retirement plan. This means using multiple sources of income like:
- Personal savings
- Employer pensions
- Low-risk investments (like index funds or bonds)
- Retirement accounts (401(k), IRA, etc.)
Experts also say that the earlier you start saving, the better. Even small investments can grow over time thanks to compound interest.
The Biggest Mistake: Not Estimating Your Social Security Benefits
One major mistake people make is not checking how much they might get from Social Security when they retire. You don’t want to wait until your 60s to realize you won’t have enough money.
The good news? The SSA provides an online calculator that can give you an estimate based on your income and work history. You just need to create a free “My Social Security” account at ssa.gov.
Once logged in, check that your earnings history is correct. If there are errors, your future benefits could be lower than they should be. Fixing these mistakes early helps you get the money you deserve when you retire.
Why You Need a Long-Term Plan
A solid retirement plan is built over time. Based on your current income, you should calculate:
- How much you need each month to live comfortably in retirement
- How much Social Security will pay you
- How much extra you need to save from other sources
By doing this early, you avoid depending too much on Social Security and avoid surprises later in life.
Other Mistakes That Lower Your Benefits
Here are three more common mistakes that can affect your Social Security income:
1. Claiming Too Early
You can start receiving Social Security at age 62, but this will reduce your monthly benefit permanently. Most people don’t realize that your Full Retirement Age (FRA) is actually 67, not 65 as many believe.
If you claim benefits at 62, your payments can be reduced by up to 30%. If you wait until 67 or even delay until 70, your benefits increase. This can make a huge difference in your monthly income.
2. Not Working Long Enough
To qualify for Social Security, you must work at least 10 years. But your benefit is calculated based on your top 35 earning years. If you work fewer years, zeros are added to your record, which lowers your average and reduces your benefits.
Try to work at least 35 years to get the best possible monthly payment when you retire.
3. Not Knowing the Rules
Many people simply don’t know how Social Security works — and that can lead to poor decisions. Understanding terms like “full retirement age,” “early retirement,” and how your benefit is calculated will help you make smarter choices.