Millions of seniors today collect a monthly benefit from Social Security. And once you retire, you may find that Social Security becomes a very important income source for you, too.
That's why it's essential to try to lock in as generous a monthly benefit as you can. But by making these moves, you might do the opposite -- slash your monthly benefit for life.
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1. Claiming benefits before full retirement age
You're entitled to your full Social Security benefit based on your individual wage history once you reach full retirement age, or FRA. That age hinges on your year of birth and is 67 if you were born in 1960 or later.
You're allowed to sign up for Social Security before FRA. Benefits become available to you at age 62. But for each month you sign up ahead of FRA, your monthly benefit gets reduced on a permanent basis.
Now there is a way out of that permanent reduction. If you file for Social Security early but undo your claim within a year and repay all of your benefits, you're able to file again at a later age. This do-over, so to speak, is only available to you once in your lifetime, though. And you'll need to act within 12 months to avoid a permanent hit to your monthly benefit.
2. Retiring before working a full 35 years
Social Security doesn't pay all seniors the same benefit. Rather, the sum you're entitled to each month will hinge on how much you earned during your career.
Specifically, Social Security benefits are calculated based on workers' top 35 years of earnings. But if you decide to end your career before having worked a full 35 years, you could end up with less money from Social Security because you'll have $0 factored into your benefits calculation for each year you're missing earnings.
Now if you took a really long career break and are reaching FRA with, say, only 22 years of work, then attaining that 35-year earnings history may not be doable. But if you're nearing FRA with 33 years of income under your belt, then it may be possible to extend your career and work another two years. Even a couple of years of part-time income will help.
3. Failing to correct errors on your earnings statements
Each year, the Social Security Administration (SSA) issues workers an earnings statement. That statement contains not only an estimate of your future monthly Social Security benefit but a summary of your annual wages.
If you happen to check your earnings statement (which you should do yearly by creating an account on the SSA's website) and notice underreported income, you may be inclined to ignore the problem and assume that it will just work itself out. But that may not happen. And if you don't make an effort to correct a mistake that has your earnings underreported, you might end up with a smaller Social Security benefit once you're ready to file.
All told, it's a good idea to get as much money out of Social Security as you can. To get there, be careful about when you file for benefits, and if you do claim them early, know that you can undo that decision within a limited window. Also, aim to work at least 35 years and keep tabs on your reported earnings to ensure that the information the SSA has on file for you is accurate.
