Social Security is part of retirement income for most, and unintentionally reducing social security benefits is easier than ever. However, Social Security payments aren’t the same for everyone. The amount you receive each month depends on work history, the age of collecting benefits, and other sources of income.
You can understand why your Social Security check is smaller. See, there are several common reasons people have seen a reduction in Social Security benefits.
Claiming Benefits Before You Reach Full Retirement Age
You can begin receiving Social Security benefits when you turn 62. The sooner you file for benefits, the smaller your monthly payments. For every month you wait, you’ll receive a little more money each month.
You’ll receive the most if you don’t start collecting benefits until you reach your full retirement age.
The full retirement age has been increasing:
- it’s 66 for everyone born between 1943 and 1954
- 66 and two months for people born in 1955
- age 66 and four months for people born in 1956
- 66 and six months for people born in 1957
The age will continue to inch upward by two months for every birth year until it reaches age 67 for people born in 1960 and later. Waiting to file for Social Security isn’t the best decision for everyone – especially if you need the income before you hit full retirement age.
The calculations are complicating, it’s a good topic to discuss with an accountant or financial advisor.
Spouse Claiming Benefits Early
If your spouse passes away, you can get Social Security survivor’s benefit. The size of your benefit depends on the size of your spouse’s monthly Social Security payment.
You could be unintentionally reducing Social Security benefits by signing up too early.
If your spouse lowers his or her monthly benefit by going on Social Security at age 62, then your survivor benefit may also be lower. For this reason, it’s a good idea for couples to work together to decide on the best age to retire and claim benefits.
Not Working and Paying Social Security Taxes Long Enough
To calculate your Social Security benefits, the government looks at the amount of money made while working. To maximize benefits, 35 years of work history should be sent to Social Security.
If you worked less than 35 years, the Social Security Administration will fill in a “0” for each year you didn’t work. Those zeros can reduce your benefits.
To make sure you get in the 35 years, be sure to report and pay taxes on all income – a potential issue for people working odd jobs or in the gig economy.
Review the Social Security report to make sure all work is applicable. Consider whether your monthly benefit will be higher if you work a little longer.
A Pension from a Public Employer
If you work for a public employer such as a state or the federal government, you probably pay into a public pension program rather than paying Social Security taxes. When you retire, you’ll receive payments from the pension instead of getting Social Security.
Many people change jobs throughout their lives, and working history may include time at a government job and at a private company. This makes you potentially eligible for both Social Security and a public pension.
If you fall into this category, the Social Security Administration reduces your Social Security benefit to prevent you from getting a windfall. This rule only applies to people who receive a public pension.
If you have a pension from a private employer, you can receive both the pension and your full Social Security check. This is because you pay into the Social Security system while you work.
Working After Filing for Social Security Benefits
Until you reach Social Security’s full retirement age, your benefits may be temporarily reduced if you earn too much money from outside employment. If you are 65 or under, you can earn up to $17,640 in 2019 without affecting your Social Security check.
Unintentionally reducing Social Security benefits can happen when you start working after you file.
One of every two dollars you earn over that amount will be temporarily withheld from your Social Security payment. In the year you reach your full retirement age, you can earn up to $46,920, and only one in every three dollars over that amount will be withheld.
This rule only affects the income you earn from working – you can make as much as you want from investments, real estate and other passive sources of income without affecting your Social Security benefit. Once you reach your full retirement age, the money you earn from working will not affect your Social Security payment.
Unintentionally Reducing Social Security Benefits
Maximizing benefits is the number one goal of many retirees. If you’re having difficulties understanding which routes to take, contact a professional for suggestions.
Our agents are knowledgeable in Medicare; they may be able to assist you with common questions and help you find the right person for contact.
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