Social Security can be a lifeline for many older adults, but your strategy can make or break your retirement. The average retiree collects just over $1,900 per month in benefits, as of February 2024, but certain decisions could heavily impact the size of your monthly checks. While there’s no single correct approach to Social Security, there are a few moves you could end up regretting later in life.

1. Claiming at the wrong age

Of all the factors influencing your benefit amount, the age at which you begin claiming is perhaps the most important. You can file as early as age 62, but for every month you wait (up to age 70), you’ll receive larger payments.

There’s no one-size-fits-all approach to when to claim benefits, but some ages may be better than others, depending on your situation.

For example, if your savings are falling short, you may be better off delaying benefits. By waiting until age 70, you’ll earn your full benefit amount plus a bonus of at least 24%, which can amount to hundreds of dollars per month. On the other hand, if you’re forced to retire in your early 60s due to job loss or health issues, claiming early can help you avoid draining your retirement fund too quickly.

Because your benefit amount is generally locked in for life once you file (save for annual cost-of-living adjustments), choosing the right age at which to claim is crucial. If you file too early or late, it could affect your finances for the rest of your retirement.

2. Relying too heavily on your benefits

Social Security was only designed to replace around 40% of your pre-retirement income, yet many seniors rely on their benefits far more than that. Around 1 in 5 adults age 50 and older have no other retirement income outside of Social Security, according to a 2023 report from the Nationwide Retirement Institute.

There’s nothing wrong with depending on your benefits to some degree in retirement. But again, the average retiree receives less than $2,000 per month from Social Security. As costs continue to rise, it will be tough for many older adults to survive primarily on their benefits alone.

Also, there’s a chance benefits could be slashed in the relatively near future. The Social Security Administration’s trust funds are quickly running dry and are expected to be depleted by 2034, according to the Board of Trustees’ latest estimates. If Congress can’t come up with a solution before then, benefits could be cut by up to 20%.

3. Working after taking Social Security

Working during retirement can be a smart way to stretch your savings, but if you continue earning income from a job after taking Social Security, it could reduce your benefit amount.

If you haven’t yet reached your full retirement age (FRA) — which is age 67 for everyone born in 1960 or later — you’ll be subject to the retirement earnings test. This is essentially an income limit that will determine how much of your benefits will be withheld, and there are two different limits for 2024:

INCOME LIMIT BENEFIT REDUCTION
If you won’t reach your FRA in 2024 $22,320 per year $1 for every $2 over the limit
If you will reach your FRA in 2024 $59,520 per year $1 for every $3 over the limit

SOURCE: SOCIAL SECURITY ADMINISTRATION. TABLE BY AUTHOR.

For example, say you’re 62 years old with an FRA of 67 and working part-time earning $25,000 per year. Because you won’t reach your FRA this year, you’ll be subject to the $22,320 annual limit. Your income is $2,680 over that limit, so your benefit will be reduced by $1,340 per year, or around $112 per month.

The good news is that these reductions are only temporary. Once you reach your FRA, the Social Security Administration will recalculate your benefit to account for the money that was withheld. At that point, you’ll start receiving larger checks, and your benefit will no longer be affected by your income.

This doesn’t necessarily mean that working after taking Social Security is a bad move. If you’re stretched thin financially, it can be a good idea, even if it means taking a temporary benefit cut. But it’s still important to know how your income will affect your benefits, as it will make it easier to decide whether working in retirement is worth it.

Social Security can go a long way in retirement, but the right strategy is key. The more you know about how your decisions will affect your benefit amount, the better prepared you’ll be.