Social Security benefits are earned benefits because most (but not all) Americans pay taxes for them on every dollar they earn. Since you pay into the program your whole working life, you deserve to take advantage of the benefits you've been promised.

Unfortunately, Social Security is really confusing, and there are a surprising number of ways you could lose your benefits without even realizing the effects of your actions. Here are 10 potential problems you should be aware of and avoid  -- if you can. 

Mature couple reviewing paperwork with woman in suit.

Image source: Getty Images.

1. Claiming Social Security too early

Although benefits can be started as early as age 62, claiming any time before your full retirement age (FRA) comes at a big price.

FRA is now between age 66 and 67, and you're subject to early filing penalties for every month you claim ahead of it. These can both reduce your benefit and reduce survivor benefits. The cost of early claiming can be shockingly high. In fact, if you're married and both you and your spouse claim at 62, you could end up with $500,000 less in lifetime benefits than you'd have if you'd both waited until age 70.

2. Claiming Social Security too late

Since you just read about how costly it is to claim benefits too early, you're probably confused about why claiming too late also leads to a loss.

The reason is simple: When you claim benefits any time after age 62, you miss out on some income you could've received if you'd started getting benefits the first month you were eligible. Later checks are larger ones, but you need enough bigger checks to break even for the missing income. Whether that happens hinges on how long you live.  

Of course, no one knows when they'll pass on. But if you have a history of family health issues or are in poor health (and you aren't worried about maximizing survivor benefits for a spouse), you could lose a lot of money if you wait to claim and die soon after you do. 

3. Not understanding all the benefits you're entitled to

If your spouse passed away, you should be entitled to survivor benefits. This is true even if you were divorced before your spouse's death, as long as you were married for at least 10 years and didn't remarry before turning 60. Unfortunately, as many as two-thirds of people don't know that.

And it's not just divorcees who are confused about how survivor benefits work. One report from the Inspector General revealed that more than eight in 10 people entitled to both their own benefits and survivor benefits didn't get the information needed to choose the right claiming strategy. Widows and widowers lost out on a whopping $131.8 million in benefits because of this mistake

4. Getting divorced too soon

As mentioned above, divorcees with a deceased ex should get survivor benefits if the marriage lasted at least 10 years. If your ex is still alive, you could also be entitled to spousal benefits after a marriage of at least a decade.

If your spouse makes more money than you, losing access to these benefits means missing out on more income from Social Security. And since people are often able to earn a high income because of a supportive spouse at home, these are your benefits that you're entitled to. 

Of course, no one is suggesting you should stay married for a decade just to get higher Social Security checks. But if you're close to hitting that milestone, putting off a divorce until you reach it could enable you to avoid losing tens of thousands of dollars in benefits you deserve. 

5. Failing to check your earnings history

While getting spousal or survivor benefits makes sense if your current or former spouse earned more than you, many retirees get benefits based on their own work records. If you do, Social Security figures out the amount you're entitled to based on a percentage of average wages in the 35 years you earned the most. 

Unfortunately, if your earnings history is wrong, you won't get credit for all the money you made (and paid Social Security taxes on). To make sure that doesn't happen, check your earnings record at least once a year and take action if it has an error.

6. Living in the wrong state

There are currently 13 states in the U.S. that tax Social Security benefits for at least some retirees. By 2022, there will be 12. If you're forced to give up any portion of your benefits to state taxes, your income will be that much smaller. To avoid losing your benefits that way, consider relocating someplace where you can keep all your money.

7. Earning too much taxable income

Speaking of taxes, you could also be subject to them on the federal level once your countable income hits $25,000 as a single filer or $32,000 as a married joint filer. Depending on how much you earn, as much as 50% to 85% of your retirement benefits could be taxed. 

But the key is that only some income is countable, including half your Social Security benefits as well as other taxable income. If you want to avoid losing your benefits to the IRS but don't want to have to worry about keeping your income low, consider investing in a Roth IRA or 401(k) instead of a traditional one. Your investment account distributions won't be considered countable, so you can keep more of your money.

8. Working while collecting them

If you're under full retirement age, your benefits will be reduced if you earn too much money. The threshold changes each year, and there are different rules for those who will hit their FRA in the year they work versus those who won't. But once you've reached your earnings limit and kept working, you'll miss out on some of your money.

You do eventually get back what you lost when the Social Security Administration recalculates your monthly benefit after you hit full retirement age. But breaking even can take years, and you may not live long enough to get it all. 

9. Being born in the wrong year

When determining your benefit amount, Social Security's formula relies in several key ways on the national average wage in the year you turned 60. 

Unfortunately, if you're unlucky enough to be born in a year when the average wage in the country goes down instead of up (perhaps because of coronavirus or a financial crisis caused by the implosion of the real estate market), you could lose a good portion of the benefits you'd have otherwise received. In fact, those who are turning 60 this year could miss out on around $70,000 in lifetime benefits because they had the bad luck to be born 60 years before COVID-19 hit America and led to record unemployment.   

10. Funding shortfalls

Social Security is on a path to financial disaster, with its trust fund expected to run out of money in 2035 or earlier. When the money runs out, retirees could be looking at a 24% cut to benefits. Lawmakers have tried in the past to fix the program's finances, but haven't been successful. If they don't act soon, it could become so expensive to fix it that benefit cuts become inevitable

If you don't want to lose your retirement money because Congress fails to act, hold your representative accountable and ask any candidate you consider voting for what their plan is for a fix.  

Don't miss out on Social Security benefits that should be yours

As you can see, there are far too many ways you could end up losing out on Social Security income that you both need and deserve. Before you claim your benefits, make certain you've researched all you're entitled to. Consider your claiming strategy carefully and think about talking with a financial advisor if you aren't sure what approach is best. Since your retirement benefits are likely to be an important source of income in your later years, it's worth the effort.