Bringing home a big Social Security payment can help maximize the chances of a financially secure retirement since you don’t have to worry about these benefits running out during your lifetime.
Unfortunately, some choices you make could lead to your benefits getting smaller — and you may not even be aware that these decisions will reduce your checks.
To avoid getting caught off guard, be sure to pay attention to these three things that could result in less Social Security benefits going into your bank account.
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1. Earning too much before full retirement age
If you’re hoping to work while getting Social Security benefits at the same time, you should be aware your choice to have a job could lead to losing benefits temporarily.
See, there are income limits applied to anyone who earns money from work if they are also collecting Social Security while they are under full retirement age (FRA). In 2024, if you won’t hit FRA all year, you’ll lose $1 in benefits for each $2 earned above $22,320. If you will hit FRA later in the year but haven’t yet, you lose $1 in benefits for each $3 earned above $59,520.
There is some good news in that when you miss benefits due to working, you get credited back for some of the early filing penalties that originally applied and reduced your standard Social Security benefit when you claimed it before your full retirement age. Since you are credited back for these penalties, your future benefit will be higher since it will be recalculated at full retirement age to account for money you weren’t paid.
Still, it takes a long time for the slightly higher future benefit to make up for the income missed when you earned too much. And, a higher future payment doesn’t help you now if you were counting on getting Social Security and a paycheck at the same time.
2. Not looking into spousal or survivor benefits
Social Security retirement benefits may not be the only type available to you. If you are married or were married in the past, you could also potentially be eligible for spousal or survivor benefits on your spouse’s work history.
You can claim these benefits even if you are now divorced if your marriage lasted 10 or more years. Unfortunately, sometimes people don’t realize this is an option and they leave money on the table that should belong to them. The Social Security Administration is not an expert source there to help you optimize benefits, and you need to do your own research to find out if these are available to you.
If your spouse was a higher earner, it’s especially important to know how much you could bring home if you claim on their work history instead of your own. In fact, it may be worth talking to a financial advisor to explore a claiming strategy that optimizes your combined lifetime Social Security income — whether that’s having the higher earner claim ASAP to unlock spousal benefits or having them delay to maximize survivor benefits.
3. Failing to put in 35 years on the job
Finally, the last big way you could unintentionally reduce benefits is by not staying on the job long enough. Qualifying for Social Security is pretty easy as you need only 10 years of working and earning four work credits per year. But the Social Security benefits formula is based on average wages over your 35 highest-earning years.
Working for fewer than 35 years results in a lower average wage and lower benefits because the calculation will include years of $0 wages for all those years when you earned nothing. Working more than 35 years could have the opposite impact, raising your average wage and benefit when higher-earning years replace lower-earning ones in the calculation.
Fortunately, now that you understand the impact of these three decisions, you can avoid accidentally shrinking your Social Security check and can hopefully keep bringing home the funds needed for a secure retirement.
