Mistakes made by the Social Security Administration that could cost you

Every month, the Social Security Administration (SSA) disburses over 70 million payments to beneficiaries of the Social Security Program, with the majority of them being retired workers. The amount of benefit paid to an individual depends on several factors, including their age at retirement, the length of their work history, the salary earned during that period, and the tax contributions made towards Social Security.

A new book by Boston University economist Laurence Kotlikoff and personal finance expert Terry Savage, “Social Security Horror Stories,” walks current and future beneficiaries through popular mistakes and common questions people claiming benefits often run into. We looked at a few of the most common that you should be aware of.

Evaluating when you should retire

The first recommendation from the pair does not relate to a mistake made by the SSA but is advice for those planning for retirement. Retirement age is an important decision. Unfortunately, many people make the mistake of requesting pension benefits when they hit the minimum retirement age of 62. This can reduce their monthly checks by up to 30 percent. A better option is to wait until the full age of 67 or even the maximum age of 70. Workers can postpone their benefits application to obtain a higher payment, and those who wait until age 70 can receive approximately 76 percent more compared to those who apply at age 62. Therefore, it’s crucial to carefully consider your retirement age to ensure you receive the maximum benefits possible.

Is the SSA paying you too much?

Overpayment is a significant problem that affects over a million Americans every year. It occurs when the Social Security Administration (SSA) mistakenly calculates and sends more money to beneficiaries without their knowledge. People often find out about the overpayment years later when they receive a refund letter from the SSA. These sorts of mistakes can happen for a variety of reasons, and appealing them can be a daunting and time-consuming process that can take months or even years. Therefore, it is recommended that workers keep detailed records of their interactions with the SSA, including the information they provide to the agency, such as their earnings and income history. This can help them avoid overpayment issues and ensure that they receive the correct amount of benefits.

The impact of working on your Social Security Benefits

Many people have lost thousands of dollars due to the earnings test. This rule applies to those who apply for Social Security benefits before their full retirement age and continue working, and it requires them to pay a tax if they earn above a certain threshold. The threshold amount changes every year, and in 2023 it is $21,240.

Under this rule, workers lose $1 of their Social Security payments for every $2 they earn above the limit. This can discourage many individuals from continuing to work. However, there is a rule called the “adjustment reduction factor” (ARF) that restores lost benefits once a person reaches full retirement age, which is age 70.

A heads up for those receiving survivor’s benefits

Widowed people are eligible for Social Security payments based on their spouse’s income, which can be claimed at age 60. However, once you become eligible for your SSA payments, those you received because of your status as a widower will end. If the SSA finds out that both benefits are being received, you can be asked to give back thousands.