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3 Mistakes That Will Shrink Your Social Security Checks

By Christy Bieber - Jan 18, 2020 at 12:05PM

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You'll need to avoid them if you want the most money from Social Security.

Social Security is an important source of retirement income for seniors, with half of married couples and 70% of unmarried seniors using it for at least half their funds. Unfortunately, the average benefit check isn't very big. In 2020, it's just $1,503 per month. 

Whether you're going to rely on Social Security to fund the bulk of your retirement or supplement your savings, you'll want to maximize the size of your check -- especially since benefits aren't that generous. In order to achieve that, you'll need to avoid these three mistakes that could reduce the amount you get each month. 

Older couple sitting across the desk from a financial professional and reviewing financial paperwork.

Image source: Getty Images.

1. Claiming benefits before age 70

Social Security benefits shrink if you claim them prior to a specific age designated as your full retirement age (FRA). This age is between 66 and 67 and is determined based on your birth year.

While retiring at full retirement age enables you to avoid early filing penalties -- which could be as much as 30% if you retire at 62 when your FRA is 67 -- this still won't maximize your benefits. To get the largest monthly checks, you'll need to wait until 70 to start receiving them. That's because you can earn delayed retirement credits for each month you wait between FRA and age 70. These credits can boost your benefit amount by 8% per year.

This increase is a big one and will keep paying off for you because all future cost-of-living adjustments are based on your higher starting benefit. If you retire before 70, you'll lose out on the increase and your monthly checks will always be smaller than if you'd waited.

2. Not putting in 35 years of work

Social Security benefits are based on what you earn throughout your career. Specifically, they're equal to a percentage of your inflation-adjusted average wage over the 35 years when your earnings were highest.

Unfortunately, if you haven't worked for 35 years, the Social Security Administration (SSA) doesn't adjust its formula for you -- 35 years of earnings are still counted. For each year you're short, a year of $0 wages is factored in. 

Obviously, adding zeros in when calculating any average is going to bring that average down. And the more years you're short, the more $0 years will count in your benefits-formula calculation, and the lower your benefits will be. Retiring before putting in 35 year could be a huge mistake because of this. 

3. Retiring while in your prime earning years

Many people start out with an entry-level job and a low salary. And as skills and experience grow, so do salaries.

If this sounds like your career trajectory, chances are good you're earning a lot more late in life when you're nearing retirement than you earned early in your career. This could make retiring soon a big mistake.

If you retire when your earnings have peaked, you'll lose out on the chance to raise your average wage. If you keep working for a few extra years when you're earning a lot, the higher income could replace a few years of low wages from early on, thus increasing your benefit checks.

Try to avoid these big Social Security mistakes

Mistakes that lower your Social Security benefits could have a big impact on your financial security in retirement -- especially if you'll rely on them to make up a big part of your income.

Now you know some of the key errors to avoid, so you can hopefully make smart choices that maximize the monthly income you get from Social Security.

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