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3 Social Security Mistakes to Avoid in 2020

By Maurie Backman - Dec 21, 2019 at 9:07AM

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Don't fall victim to any of these, or your finances could take a serious hit.

Social Security is an important program that impacts millions of Americans, and the more you understand how it works, the less likely you'll be to make poor choices that hurt you financially. Here are three big Social Security blunders you'll want to avoid in the coming year.

1. Not knowing your full retirement age

Your monthly Social Security benefits are calculated based on your earnings history. You can't claim them in full, however, until you reach what's known as full retirement age, or FRA. Here's what it looks like:

Year of Birth

Full Retirement Age




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

1960 or later


Data source: Social Security Administration.

If you file for benefits earlier than FRA (you can do so as early as 62), you'll automatically reduce them in the process -- for life -- so it's crucial that you know when you're eligible to receive that monthly benefit in full. Unfortunately, a survey by Fidelity released a couple of years back revealed that only 26% of Americans are aware of their FRA. Commit that age to memory so you don't wind up filing at the wrong time and regretting it later.

Professionally dressed man at laptop with serious expression

Image source: Getty Images.

2. Not checking your annual earnings statement

Each year, the Social Security Administration (SSA) issues workers an earnings statement. That document summarizes your taxable wages for the year and estimates your retirement benefit.

But sometimes, those earnings statements can contain errors, and if yours has one that works against you, it could result in a lower monthly benefit for life. For example, if the SSA is missing your entire income for a given year, or it shows a much lower income than what you actually earned (which can happen if your employer inadvertently reports the wrong information), it can hurt your personal benefits calculation.

That's why it's crucial to check that earnings statement every year. If you're under 60, you won't get a physical copy by mail (though a new bill is aiming to change that). Rather, you'll need to create an account on the SSA's website and view it there. If you do spot errors, report them to the SSA at once and find out what to do to get them corrected.

3. Not planning for Social Security taxes on your earnings

Social Security gets much of its income from payroll taxes. Your earnings are taxed at a rate of 12.4%. If you're employed by someone else, that's split evenly between you and the company that pays your salary. If you're self-employed, you're responsible for the full 12.4%.

Each year, there's a wage cap on how much of your income is subject to Social Security taxes. For the current year, it's $132,900; earnings above that limit don't count for Social Security purposes. In 2020, however, the wage cap is climbing to $137,700, which means higher earners will pay more taxes on their income. If you're one of them, adjust your budget accordingly -- especially if you're self-employed and therefore have to fork over the entire 12.4% yourself.

The savvier you are with Social Security, the more financially sound you'll be. Avoiding these mistakes in the coming year could pay off in the near term as well as the long term.

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