Social Security is slated to fall short of its financial obligations in about a decade, and after that, benefit cuts are a real possibility unless the government finds another way to resolve the funding issue. With so much still up in the air, it's important for all workers hoping to claim benefits to avoid mistakes that could short-change them even further.
There's one mistake in particular that could prove especially costly, and sadly, it happens all the time. Here's what you need to know.
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Don't make the mistake of not double-checking your Social Security data
You may already know that your Social Security benefit is based on your average monthly earnings during your working years with adjustments made for inflation. But not everyone thinks about where the Social Security Administration gets your income data in the first place.
It actually comes directly from the Internal Revenue Service (IRS). It's usually a pretty seamless process, but mistakes sometimes happen. It could be that you or your employer transposed some digits in your Social Security number on your employment paperwork. Or you may have failed to notify the Social Security Administration of a name change. Or someone could've confused you with another person who has the same name and incorrectly applied your income to them.
In the worst-case scenario, the Social Security Administration might think you didn't work at all during a year you paid Social Security taxes. This will probably shrink your monthly benefit because the Social Security Administration won't include any of that money when calculating your Social Security checks.
But you can help ensure accurate data
Fortunately, avoiding this problem is pretty simple. The Social Security Administration tracks all the income you've paid Social Security taxes on in your earnings record. You can view yours by creating a my Social Security account. The first time you set it up, you'll need to answer some identity verification questions, but after that, you should be able to log in with just a username and password.
Review your earnings record at least once per year to make sure that all the information there appears accurate. The simplest way to do this is to compare the income shown in your earnings record against your own tax returns for that year.
But things might be a little more complicated for high earners because they may not pay Social Security payroll taxes on all their income every year. In 2023, for example, you only pay these taxes on the first $160,200 you earn. Even if you make more than this, you'll still only see $160,200 in your earnings record for this year.
In prior years, the ceiling on income subject to Social Security taxes was lower. So for those who earn high salaries, it's possible that your earnings record could show a lower amount than your actual income and still be accurate. You can check what the maximum income subject to Social Security payroll taxes was for a given year, and if this is the amount showing up in your earnings record, there's nothing to worry about.
What to do if you spot an error
You shouldn't panic if you find errors in your earnings record, but you also shouldn't ignore the problem. Fill out a Request for Correction of Earnings Record form and submit this to the Social Security Administration along with any documentation you have showing your real income for that year. Tax documentation, like a W-2, works well, but don't send in your original. Submit a copy just in case the form gets lost in the mail.
Once the Social Security Administration receives your request, it will investigate and update your earnings record as necessary. This can take some time, but don't be afraid to reach out if you have any questions.
If you believe the error occurred due to a mistake on your end, like not notifying the Social Security Administration or your employer of a legal name change, correct this mistake right away so you don't have to repeat the above steps the following year.
Checking your earnings record will only take a few minutes, and you only have to do it once per year. Chances are, there probably won't be any issues. But if you do catch one, you'll be thankful you spotted it before it affected your Social Security checks.
