3 Things That'll Cause Your Social Security Benefits to Go Down

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Social Security pays the average senior today $1,461 a month. Now that's hardly enough to fund a comfortable retirement, but it's also not a negligible amount, either. In fact, those benefits could end up helping you stay afloat during your golden years. So, it pays to beware of these three factors that could slash your benefits for life.

1. Not working a full 35 years

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Your Social Security benefits are calculated based on your top 35 working years, which means that if you took an extended break from your career (say, to raise children or care for a loved one), you may not have that many years of earnings on record. The problem, however, is that for each year within that top 35 you don't have reportable wages, you'll have a big fat $0 factored into your personal benefits equation, thereby bringing down your monthly income.

The solution? Extend your career if don't have 35 years of work under your belt. For each additional year you work, you'll replace a $0 with an actual income. And chances are, that income will be higher than what your earnings looked like earlier in life, thereby bringing up your benefits even more.

2. Not checking your earnings statements

The Social Security Administration (SSA) issues an annual earnings statement to workers summarizing what their taxable wages entailed for the year and what their benefits might look like in retirement. If you're under 60, you won't get a copy of this statement directly. Rather, you'll have to create an account on the SSA's website and access it there. But it pays to review your earnings statement each year, because if you spot an error that works against you, getting it fixed could help you avoid a needless reduction in benefits.

What sort of mistake might an earnings statement contain? It could be that the SSA has no income on record for you during a year when you actually worked and paid taxes. Or, it could have a lower amount on record than what you earned. Either scenario could result in a reduction in benefits if you don't take steps to correct it.

3. Not waiting until full retirement age to file

Eligible seniors are allowed to start collecting Social Security as early as age 62. But if you don't wait until full retirement age to claim benefits, you'll lower them in the process.

Your full retirement age will depend on your year of birth, as follows:

Year of Birth

Full Retirement Age

1943-1954

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

67

For each month that you claim benefits ahead of full retirement age, you'll face a reduction, and one that will remain in effect permanently unless you manage to withdraw your benefits application within a year of filing and repay the SSA all of the money it paid you. The most extreme cut in benefits you might face is 30%, which would happen if your full retirement age is 67 but you file at the earliest possible age of 62. But that's a pretty substantial hit to take, especially if you plan to rely on Social Security as a major income source down the line.

The takeaway? Commit your full retirement age to memory, and aim to wait until that age to file for Social Security unless there's a compelling reason to claim benefits earlier.

Though the average Social Security beneficiary today receives $17,532 a year, you may be entitled to much more when it's your turn to file. Avoid reducing your benefits unnecessarily, as they could end up being a lifeline during retirement.

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