You give money to the Social Security Administration every pay period with the understanding that it will give some of that money back to you as a form of guaranteed income in retirement. But the amount you receive isn’t dictated entirely by the government.
Your decisions affect the size of your checks, and while that can be empowering, it can also be devastating if you make the wrong choices. If you want the most money possible out of Social Security, you must avoid the three mistakes below at all costs.
1. Ignoring your earnings record
The Social Security Administration (SSA) keeps track of how much income you’ve paid Social Security taxes on in your earnings record, which you can view by creating a my Social Security account. This is the information the government uses to determine the size of your Social Security checks when you’re ready to begin claiming, so it’s important to ensure it’s accurate.
The SSA gets this information from the Internal Revenue Service, so mistakes are rare. But if you or your employer accidentally wrote down the wrong Social Security number or you changed your name but forgot to tell your employer about it, that could result in your earnings for a given year being reported incorrectly or not at all. If this happens and you don’t realize it, you’ll get smaller Social Security checks in retirement than you deserve.
If you notice an error in your Social Security earnings record, fill out a Request for Correction of Earnings Record form and submit it along with any documentation, like old tax forms, that prove your real income for a given year to the SSA. Follow up after you submit this to ensure your earnings record is updated with the correct figure.
2. Not working long enough
Only those who have worked long enough to earn 40 credits are eligible for Social Security benefits. The definition of a credit varies from year to year. In 2020, you must earn and pay Social Security tax on $1,410 to get one credit. The most credits you can earn in a single year are four, so you must work for at least 10 years in order to earn enough credits to qualify for benefits, though these 10 years don’t have to be consecutive. If you’re unsure how many years you’ve worked thus far, you can check your earnings record to find out.
While 10 years is the minimum amount of time you must work to enjoy Social Security benefits later in life, working longer is even better. Your benefit is based on your average monthly income over your 35 highest-earning years. If you worked for fewer than 35 years, the SSA will add zero-income years to your calculation, weighing down your average. Conversely, if you work for more than 35 years, your lower-earning years are replaced by your higher-earning years, resulting in larger checks.
3. Delaying benefits for too long
The age you begin collecting Social Security also plays a role in the size of your checks. You must wait until your full retirement age (FRA) — 66 or 67, depending on your birth year — to get the full benefit you’re entitled to. You can start as early as 62, but every month you receive benefits below your FRA decreases the size of your checks. If you begin at 62, you’ll only get 70% of your scheduled benefit per check if your FRA is 67 or 75% if your FRA is 66.
You can also delay benefits past your FRA and your benefits will increase over time. This is a favored strategy for those who expect to live long and want the most benefits possible. But your benefits max out at 70, so delaying past this point will only cost you money.
Delaying benefits may also not make sense if you don’t expect to live a long life. You get larger checks by waiting, but you’ll get fewer of them, which could mean less benefits overall. You should always estimate your average lifetime benefit at different ages before deciding when to begin Social Security if you want the most money overall. Multiply your monthly benefit at different ages, which you can find in your my Social Security account, by 12 to get your estimated annual benefit and then multiply that by the number of years you expect to receive benefits to see which will give you the most money overall.
No one wants to shortchange themselves when it comes to Social Security benefits, so take the time to check your earnings record regularly and think carefully about when you plan to retire and begin benefits so you can squeeze the most out of the program.