The Social Security landscape can sometimes seem complex with all of its nuances and ever-changing guidelines. That's why it's important to cut through the noise and make sure you're knowledgeable about the information that's most relevant to you. The more you know, the less likely you are to unknowingly make mistakes that could cost you.
Here are three Social Security mistakes you may be making that you should be aware of.
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1. Not knowing exactly what's on your earnings record
Your earnings record is where Social Security keeps track of all your earnings over the years.
To view your earnings record, you need to first create an account on the Social Security website. Once you have an account created, you should have access to your earnings record. The information in your earnings record is what Social Security will use to calculate your benefits, so it's important to make sure it's accurate.
High earners may notice that all their income isn't showing up, but that's because only earnings up to a certain amount are taxed for Social Security each year. In 2023, this amount is $160,200.
Outside of checking for accuracy, you should view your earnings record to get an idea of your projected benefits based on when you begin receiving them. Having an idea of your benefit amount can help you decide when taking benefits makes sense for you.
2. Not knowing your full retirement age
There are many different numbers to know with Social Security, but few have as much effect as your full retirement age. Your full retirement age (FRA) is based on your birth year and is when you're eligible to receive your full Social Security benefit.
| Birth Year | Full Retirement Age |
|---|---|
| 1943 to 1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 or after | 67 |
Data source: Social Security Administration.
Your full retirement age is so important because it serves as the baseline for calculating benefits if you take them early or delay them.
Taking benefits early will reduce them based on how far away you are from your full retirement age. If you're within 36 months of FRA, they're reduced by five-ninths of 1% each month. Any earlier, and they're reduced by five-twelfths of 1% each month. For example, taking benefits at 62 with a FRA of 67 will reduce them by 30%.
Conversely, you can delay benefits past your full retirement age, increasing them by two-thirds of 1% each month (8% per 12 months) until you reach 70. If your FRA is 67 and you delay benefits until 70, they'll be increased by 24%.
3. Unknowingly earning too much money while receiving early benefits
Claiming Social Security doesn't take away your ability to earn money. It just means you'll need to monitor how much you make, because it could affect your monthly benefit amount.
Social Security uses a retirement earnings test (RET) for people who take benefits before their FRA and earn over a certain amount. People reaching their FRA in 2023 can earn up to $56,520 in the months leading up to their birthday. People taking benefits early who won't reach their full retirement age in 2023 can earn up to $21,240.
Earning over the limit will reduce your monthly benefit, but luckily the reduced amount is gradually added back to your monthly benefit when you reach your FRA.
For instance, let's assume your FRA is 67 and you take benefits at 65. If the RET lowers your benefits by $2,500 annually, Social Security will withhold $5,000 in the two years until you reach 67. Once you turn 67, Social Security will then recalculate your benefits in a way that gradually pays you the $5,000 back over time.
The earnings limit generally changes yearly, so it's important to know the threshold for the given year you're considering working while taking benefits early.
