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6 Signs You're at Risk of Losing Out on Social Security Benefits

By Christy Bieber – Sep 12, 2020 at 11:45AM

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Are you at risk of inadvertently shrinking your checks?

For most retirees, maximizing Social Security income is a smart financial choice. These benefits keep coming for life and are even indexed to inflation, so they can help keep you out of poverty late in retirement when your savings may be running short. 

But not everyone makes the best decisions when it comes to claiming benefits. And sometimes people actually make mistakes that cost them without even realizing it. To avoid this fate, watch for these six signs that you're in danger of losing some of the Social Security income you could receive. 

Older man grabbing piggy bank from outstretched arms.

Image source: Getty Images.

1. You're considering retiring when you haven't worked for 35 years

No matter how long you've actually worked for, the Social Security Administration determines the amount of your benefit based on inflation-adjusted average earnings over your 35 highest earning years. Based on that formula, the problem with working less than 35 years is obvious: You'll have zero-dollar years included when your average is calculated and your benefits will be lower because of it. 

2. You're thinking about leaving work at the peak of your earning power

Since the Social Security benefits formula takes your 35 highest-earning years into account, staying on the job more than 35 years prevents some years of low earnings from dragging down your average. If you've advanced in your career, it can really pay off to put in a few extra years at a high salary so they'll be included in your average.

Continuing work for an extra year or two when you're earning a good living can also help you to supercharge your savings accounts. Having both more investment income and a higher Social Security benefit makes a huge difference in your quality of life as a retiree. If you give that up, you may end up regretting it. 

3. You're claiming benefits without coordinating with your spouse

Social Security decisions not only impact your household income -- they can also affect your spouse's ability to claim benefits. If you wait to claim, your husband or wife cannot get spousal benefits on your work record until you've taken your own benefits. But if you claim ahead of your full retirement age and you're the higher earner, you could reduce the survivors benefits available to your spouse, consigning them to financial struggles if you pass on first.

Developing a solid strategy for when you each claim allows you to maximize the money both of you receive, while not putting together a plan can cause you to lose thousands in combined lifetime income. 

4. You're considering going back to work without understanding the impact on your benefits

Going back to work won't affect the amount of your benefit checks if you've already reached your full retirement age. But if you haven't, you could find yourself having some of your benefits withheld if you earn too much.

This isn't always a bad thing. In fact, if you forfeit some benefits, the Social Security Administration recalculates the amount you're due each month once you've hit full retirement age and you could get larger checks in the future. But if you were counting on getting a paycheck and Social Security to make ends meet, you'll need to know how much you can earn before some of your benefits are deferred. 

5. You're thinking about a move to one of these 13 states

Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia all tax Social Security benefits under at least some circumstances. If you're considering relocating to any one of them, make sure you know if your retirement benefits will be subject to state tax. If they will, consider how much you'd lose by living there.

6. You're thinking about claiming benefits before 70

Any time you claim before the age of 70, your monthly Social Security check is smaller than it otherwise would've been. That's because early filing penalties reduce your monthly income for each month you receive benefits ahead of full retirement age, while delayed retirement credits increase it for each month you wait after FRA until 70.

Delayed retirement credits can't be earned after 70, though, so there's no real reason to delay any longer. But if your goal is to get the absolute maximum monthly income, you'll want to wait until then. Of course, this doesn't always mean you'll get the most total lifetime benefits, as that depends on how long you live. But delaying is often the financially optimal move if you don't want to risk missing out -- especially as it can also give you more time to put in those higher-earning years that raise your average wage. 

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