January 21, 2022

3 Seemingly Innocent Moves That Could Lower Your Social Security Income

You will probably be quite dependent on Social Security to pay your bills during your retirement. Even if you start your senior years with a decent chunk of savings, you could deplete your IRA or 401(k) in your lifetime.

The beauty of Social Security is that it is designed to pay you a monthly benefit for the rest of your life. And playing your cards right can help ensure that your monthly benefit is as generous as possible. However, these seemingly harmless mistakes can lead to lower benefits — and more financial hardship during your senior years.

A person with a serious expression holding a document.

Image source: Getty Images.

1. End your career a few years earlier

The Social Security benefit you are entitled to upon retirement depends on your earnings during your 35 highest-paying years in the workforce. But for every year you don’t have recorded income, you get $0 in your benefit equation.

Let’s say you’ve taken some time off during your career to raise children, travel, or focus on volunteering. You may be in your early 60s but have only had 33 or 34 years of income. Unfortunately, that could be problematic from a Social Security standpoint, in which case it might pay to work another year or two to lock in a higher benefit.

2. Sign up for benefits in conjunction with Medicare

Health Care Eligibility starts when you turn 65 and you can even sign up a few months before your 65th birthday. Once you sign up for Medicare Part B, which covers outpatient services and diagnostics, you get a monthly premium, the cost of which changes from year to year.

If you don’t already collect Social Security at the time of your Medicare enrollment, you will be given the option to pay your Part B premiums directly. But if you have Social Security, you can have those premiums deducted from your monthly benefits to avoid that hassle.

You may be tempted to sign up for Social Security at the same time as Medicare just for the convenience factor. But then you will reduce your monthly benefit. That’s because you won’t get your full benefit based on your pay history until you reach full retirement age, or FRA.

FRA doesn’t start until age 66 at the earliest. And if you were born in 1960 or later, FRA won’t come until you’re 67.

3. Not reporting income from a side job

You may be motivated to take a part-time job in addition to your main job to increase your income. But if you don’t report the money you make from that second gig, it won’t count toward a higher Social Security benefit.

The monthly benefit to which you are entitled upon retirement is not based solely on wages. If you work as a freelance consultant, that income can also count towards the calculation of your benefit. But if you don’t report it, your benefit won’t get that boost.

By the way, it’s important to report all of your income to comply with IRS rules. You can be fined for failing to report and pay taxes on income you earn on top of it.

Don’t reduce your benefits unnecessarily

It doesn’t matter what you savings balance It looks like you’re retiring, there’s no point in cutting your Social Security income because of carelessness. Now that these blunders are on your radar, you can take steps to avoid them — and potentially secure a higher life benefit.


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