The 6 Social Security Traps That Could Cost You Tens of Thousands Before 67

Social Security decisions made in your early-to-mid 60s can make or break your retirement finances. With earnings limits and tax rules shifting heading into 2026, one wrong move could quietly drain your resources for decades. Financial experts warn that many people claim benefits based on fear rather than math—and by the time they realize their mistake, it’s too late to correct it.

Early Filing Errors: The Costly Myth About “Running Out of Money”

Claiming at 62: The Most Expensive Decision

The biggest red flag? Taking Social Security at 62 simply because you’re worried the system will collapse. This panic-driven choice locks in permanently reduced benefits that never fully catch up to inflation.

Consider the math: A 62-year-old earning $60,000 annually faces an $18,300 reduction in lifetime benefits just from early filing. That’s not a small supplement—it’s a massive long-term loss.

What most people don’t realize is that the Social Security Trust Fund crisis is overstated. Even in a worst-case scenario around 2032, benefits would be trimmed by 20-25%, not eliminated. Yet retirees are surrendering decades of buying power over an exaggerated fear.

Financial advisors also point out that early claimants often don’t “run the numbers on how those benefits get hammered by taxes.” Once you account for income tax on Social Security benefits, your actual take-home shrinks even further.

The Earnings Test Nobody Understands

If you claim before full retirement age (FRA) and earn more than $23,400 annually from employment, the Social Security Administration reduces your benefit by $1 for every $2 you earn above that threshold. Someone still working in their early 60s could see their Social Security nearly disappear—yet they keep claiming anyway because they didn’t understand this rule.

The Delayed-Too-Long Trap and the Cash Flow Paradox

When Waiting Becomes the Wrong Strategy

On the opposite end, some retirees assume delaying benefits is always smarter. It’s not. Determining your optimal filing age requires looking at your actual financial situation, not just maximizing lifetime benefits on paper.

If your investment portfolio and savings can’t cover your living expenses, claiming early is often the better move. As financial consultant Paul Walker, whose approach to retirement planning gained attention for its straightforward logic, would suggest: the decision should hinge on need, not theory. “If you need the money, file when you need it. If you don’t need it, you can afford to wait.”

The real question isn’t “when maximizes my total benefits?” It’s “when do I actually need cash flow?” Taking distributions from a depleting portfolio while delaying Social Security can be far more damaging than claiming earlier and preserving your assets.

Missing Spousal and Survivor Benefit Strategies

Widows, divorcees, and couples often leave thousands unclaimed simply because they don’t explore spousal and survivor options. A nonworking spouse can receive up to 50% of the higher earner’s benefit, but only if they claim smartly.

Here’s the strategy most people miss: Have the lower-earning spouse claim at full retirement age while the higher earner delays. Over a lifetime, this coordinated approach can add tens of thousands in additional benefits.

One critical detail: spousal benefits don’t depend on when the higher-earning spouse files. If the nonworking spouse waits until FRA to claim, they get the full spousal benefit regardless of the other spouse’s filing date. Claiming early as a spouse, however, permanently reduces that benefit.

The Tax and Medicare Enrollment Mistakes That Trigger Penalties

Taxes on Social Security Are a Surprise to Many

Few retirees properly calculate how much of their Social Security becomes taxable. Between Medicare premiums, investment income, and the complex taxation rules around benefits, your actual net payment can be substantially lower than expected—unless you run the numbers with professional guidance.

Without an advisor “crunching your specifics,” as one CFP put it, “you’re flying blind” on tax implications.

The Medicare Enrollment Penalty Nobody Sees Coming

One of the most damaging mistakes? Assuming Medicare automatically enrolls you at 65. It doesn’t. Missing the enrollment deadline triggers substantial late-enrollment penalties that stick with you permanently.

This penalty is often a shock because people assume they’re covered once they hit the age threshold. They’re not—and the bill arrives faster than the realization.

Claiming Based on Emotion Instead of Data

Most retirees make their Social Security decision on gut instinct, habit, or misinformation rather than running actual breakeven analyses. This emotional approach ignores both your personal circumstances and current market conditions.

If markets are in severe downturns, financial advisors might recommend claiming Social Security now to reduce how much you need to withdraw from a declining portfolio. This protects you from selling assets at the worst time and gives your investments time to recover.

The antidote? Run your own breakeven scenarios, model the tax impact, and don’t let fear drive the decision. The numbers rarely align with what people assume.

The Bottom Line: Math Over Panic

Avoiding these six traps in your early 60s could add tens of thousands to your retirement security—or prevent losing that much. The decisions you make before 67 will echo through your entire retirement. Make them count.