Exploring Heather Schreiber’s 5 costly Social Security traps and exploring options of how to handle them.

I’ve seen it time and again throughout my career: the intricacies of navigating Social Security can trip up just about anyone. So when I saw the headline “5 Sneaky Social Security Traps” in Heather Schreiber’s newsletter, I knew right away this was going to be something that deserved a closer look on the podcast.

Let’s dive into these 5 Social Security traps–and these aren’t just random quirks—that can lead to unexpected gaps in income, tax surprises, or permanent reductions in your benefits. 

1. The Entire Month Rule

You might think that turning 62 means you're automatically eligible for Social Security that month. Not quite.

Social Security has a quirky rule: you have to be 62 for the entire month to receive benefits for that month. If your birthday is on June 15, you don’t qualify for June’s benefit. Instead, your eligibility starts in July, and your first payment doesn’t arrive until August.

What’s even weirder is that the SSA counts your birthday as the day before you were born. So if you're born on June 2, you're considered 62 starting June 1 and therefore eligible for June benefits (which are paid in July).

If you’re planning on your Social Security check arriving the month you turn 62, you could be left waiting an extra month or two—potentially throwing off your cash flow.

2. Rest in Peace, Now Return to Sender

Just like you must be alive the entire month to earn that month’s benefit, if someone passes away mid-month, they don’t qualify for that month’s Social Security payment—even if it’s already been deposited.

This can be a shock to surviving spouses or family members when the SSA takes that money back. If a loved one passes away on June 14, and the June payment was already deposited in early July, that money must be returned. It wasn’t “earned” under SSA rules.

So whether you're filing for your own benefit or helping a family member, remember: Social Security is earned month-by-month—and only if you’re alive for the full month.

3. Lump Sum FOMO: When Free Money Isn’t Always Free

When you file for Social Security after your full retirement age, you have the option to take up to six months’ worth of benefits retroactively. That sounds great—who doesn’t like a lump sum?

But here’s the catch: taking that lump sum means your official filing date is backdated. So if you file at age 68.5 and take six months retroactive payments, SSA treats you as if you filed at 68—reducing your benefit by 4%.

That “free” $18,000–$20,000 could cost you thousands more over the course of your retirement. Sometimes it’s worth it, but many people take the lump sum without realizing the long-term cost.

4. Under-Withholding Today May Lead to Regret Tomorrow

Here’s a situation I see far too often: retirees who start taking Social Security, forget to set up federal tax withholding, and then get a surprise bill come tax season.

Unlike pensions or employer paychecks, Social Security doesn’t automatically withhold taxes unless you fill out a separate form (Form W-4V). If you don’t do this and your Social Security income is taxable, you could owe hundreds—or thousands—at tax time.

Take the time to set up appropriate withholding levels. SSA allows you to choose from 7%, 10%, 12%, or 22%. 

5. Medicare IRMAA and the Two-Year Lookback

When you hit age 65 and enroll in Medicare, your premiums for Part B (and possibly Part D) can go up significantly if your income from two years ago was high.

This IRMAA (Income-Related Monthly Adjustment Amount) surcharge can sneak up on you—especially if you had a one-time event like a Roth conversion, large capital gain, or business sale.

If you had a significant drop in income due to retirement, job loss, or other life event, you can appeal your IRMAA using a life-changing event form (SSA-44). I’ve helped dozens of clients successfully reduce th...