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3 Social Security Mistakes You Might Make During Your Working Years

By Maurie Backman – Oct 1, 2021 at 5:04AM

Key Points

  • Social Security could end up being an important retirement income source.
  • A few seemingly innocent blunders could leave you with a lower benefit for life.

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Be careful -- the moves you make throughout your career could impact your benefits in the future.

Retirees routinely rely on Social Security to cover their living expenses. Therefore, the more money you're able to collect in benefits, the better.

You'll often be warned that filing for Social Security at the wrong age could cause you a world of financial stress throughout retirement. But here are some mistakes you might make throughout your career that have a similar impact.

Person at computers wearing headset

Image source: Getty Images.

1. Coasting at a lower-paying job

Some people spend years working a job that's not too difficult but also not too generous on the salary front. And to be clear, there are benefits to coasting at an easier job, like less stress and a better work-life balance.

But one thing you should know is that the monthly Social Security benefit you'll be eligible for in retirement will hinge on your personal earnings history. The less money you make, the lower the benefit you'll collect. If you're offered an opportunity to take a promotion at a higher salary, you may want to consider it -- even if it means having to push yourself a bit more on the job and put in longer hours.

2. Not reporting your side income

Many people get side hustles on top of their main jobs to boost their income. But if you don't report those earnings, you could end up with a lower Social Security benefit down the line.

It's not just your earnings from your main job that count toward Social Security. If you drive for a ride-hailing service a few hours a week or work at a restaurant on weekends, that income also is factored into your future benefits. So it's important that you report that income to the IRS to help ensure that you get your maximum benefit during retirement.

Incidentally, failing to report income could get you into hot water with the IRS from a tax standpoint. So that alone is reason to list all of your earnings when you file your yearly tax returns.

3. Not reviewing your annual earnings statements

The Social Security Administration (SSA) issues all workers an earnings statement every year. Yours will summarize your income and also give you an estimate of the future Social Security benefit you can look forward to based on your earnings to date.

It's important that you review those statements for errors, because some mistakes could result in a lower benefit during retirement. For example, if your income for a given year is reported as $57,000 when you really earned $72,000, that could impact your future benefit, so that's a mistake worth correcting.

Workers who are 60 or older will receive their earnings statements directly in the mail. If you're younger, all you need to do is create an account on the SSA's website and access it there.

Social Security could easily end up becoming an important income source for you in retirement, even if you kick off your senior years with a decent chunk of savings. Avoid these mistakes so you can lock in a higher monthly benefit to enjoy.

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