5 Risks That Could Put Your Social Security Benefits in Jeopardy
Millions of Americans depend on Social Security benefits to help them navigate retirement, and with good reason: It’s money that workers have earned over their lifetimes.
However, it’s crucial to understand the circumstances that could impact these benefits, whether you’re currently relying on them or planning for future retirement. Financial experts caution about several potential pitfalls that could put your Social Security earnings at risk.
1. Claiming Benefits Early
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While you can begin receiving Social Security benefits at age 62, doing so may not always be the best choice. “If you claim early, you will receive a reduced monthly payment for the rest of your life,” said Cliff Ambrose, wealth manager at Apex Wealth.
“If you’re in good health and financially able, delaying benefits until your full retirement age or even age 70 could significantly increase your monthly payments.”
2. Working While Receiving Benefits
It’s possible to work and collect Social Security benefits at the same time, but this could reduce your benefits if you claim before reaching full retirement age. Ambrose explains, “There’s a cap on how much you can earn before your benefits are temporarily reduced. It’s essential to be aware of this if you’re still working but drawing benefits early.”
3. Taxes on Benefits
Social Security benefits can be taxed depending on your total income. If you have other sources of income, such as investments or withdrawals from retirement accounts, you may end up owing more taxes than expected. Ambrose recommends consulting with a tax advisor to minimize the tax impact on your benefits.
4. Divorce and Social Security
Divorce can also affect your Social Security benefits, especially if you were married for at least 10 years. You may be eligible to claim benefits based on your ex-spouse’s work history, but this changes if you remarry. Ambrose advises understanding the rules around spousal and ex-spousal benefits to avoid losing access to what you’re entitled to.
5. Errors in Your Earnings Record
Your Social Security benefits are calculated based on your 35 highest-earning years. If there are mistakes in your earnings history, this could lower your benefits. “It’s a good idea to regularly check your Social Security statement to make sure all your earnings have been accurately recorded,” says Ambrose.
By keeping these risks in mind, you can better manage your Social Security benefits and protect your financial security in retirement.
