5 Things That Put Your Social Security Benefits at Risk
Written by
Nicole Spector
Edited by
Molly Sullivan
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Tens of millions of Americans rely on their Social Security benefits to get by in retirement. There’s certainly no shame in this; after all, you worked for that money and we all, at some point, have to retire.
If your Social Security benefits are currently a vital financial lifeline for you or you expect them to be later on, you need to know the fine print they come with, and this includes the moves or circumstances that can endanger your Social Security earnings.
Let’s explore, with the help of financial experts, thefive things that can put your Social Security benefits at risk.
Claiming Benefits Early
Sometimes it makes sense for your situation to claim Social Security benefits early (you can start collecting at age 62). But this can be a risky move.
“While you can start collecting Social Security at 62, doing so means you’ll receive a smaller monthly payment for the rest of your life,” said Cliff Ambrose, FRC, founder and wealth manager at Apex Wealth. “If you’re in good health and can afford to wait, holding off until your full retirement age — or even age 70 — can result in a much larger benefit.”
Working While Claiming Social Security
You can work and collect Social Security benefits at the same time, but this too is risky business.
“If you start drawing benefits before your full retirement age and continue to earn income, your benefits could be temporarily reduced depending on how much you make,” Ambrose said. “There’s a cap on how much you can earn before Social Security withholds part of your benefits, so it’s important to plan for this if you’re not yet at full retirement age but still working.”
Taxes
Taxation on your Social Security benefits is yet another factor to consider.
“Depending on your overall income, a portion of your Social Security benefits could be subject to federal taxes,” Ambrose said. “If you’re withdrawing from other retirement accounts or earning income through investments, you may find yourself owing more in taxes than you anticipated.”
To get on track and ensure your benefits are protected in full, Ambrose recommended working with a tax advisor, who can help you minimize the impact of taxation on Social Security.
Divorce
“Divorce can also affect your Social Security benefits,” Ambrose said. “If you were married for at least 10 years, you may be eligible for benefits based on your ex-spouse’s work record. However, if you remarry, you could lose access to these benefits. Understanding the rules around spousal and ex-spousal benefits can help you avoid losing out on money you’re entitled to.”
Not Keeping an Eye on Your Earnings Record While You’re Still Working
Did you know that not keeping an eye on your earnings record in your working years could reduce your Social Security benefits? Yup, it’s true.
“Your benefits are calculated based on your 35 highest-earning years, so if there’s an error in your earnings history, you could end up with less than you deserve,” Ambrose said. “It’s a good idea to regularly check your Social Security statement to ensure all your earnings have been accurately reported.”
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