What can reduce your Social Security retirement benefits?

Eligible Americans can start claiming Social Security retirement benefits from the age of 62 and the program provides a vital form of support for tens of millions of people every month.

The size of the monthly payments is dependent on the work history, employment status and personal circumstances of the recipient. This means that actions you take during your life have a direct impact on your Social Security payments in retirement.

There are a few things that can actually work to reduce your benefits, so try to avoid the following if you want to maximise your post-retirement income…

Filing early

The swiftest way to reduce your retirement benefits is by claiming the support prematurely. Eligible Americans are able to file a claim once they reach 62 but you should always try to hold off until you reach full retirement age, at the earliest.

For people born 1943-1954 the full retirement age is 66. That threshold increases by two months for every year born after 1955, until it reaches 67 for those born in 1960 or later.

If you can hold off on initiating a claim until you turn 70 then you will receive a larger monthly payment for the rest of your life.

Working while in receipt of Social Security

You can start claiming retirement benefits while still working, but doing so before you reach full retirement age will result in a proportion of your benefits being withheld. This will not lower your lifetime benefits, but does affect the amount you receive initially.

Once you hit full retirement age the Social Security Administration (SSA) will recalculate your entitlement and you should start to receive biggest payments.

Working fewer than 35 years

Your Social Security entitlement is based on your 35 highest-earning years (adjusted for inflation). If you have not worked for 35 years when you initiate your Social Security claim then you will be given a wage of $0 for the missing years.

This will lower your primary insurance amount (PIA) and reduces the size of your monthly retirement checks.

Leaving the workforce at a time when your earnings are high

As a general rule, the more you earn during those 35 years will result in a larger Social Security check. If you find yourself earning more as your approach retirement, you could increase your PIA by continuing to work longer before claiming Social Security.

The additional years of higher earnings will replace your lowest-earning years and increase your benefit amount.