Nov 9, 2024 Current Resources

5 Mistakes That Could Cost You Your Social Security Payments

(TheDailyCurrents.com) – Social Security provides income during retirement or incapacitated through Social Security Disability Insurance (SSDI). It also offers benefits to your legal beneficiaries after your death. In 2023, the maximum you can receive in benefits would be $3,627 if you retire at full retirement age (67). However, you can benefit from higher or lower than this amount or, in some cases, none. These mistakes could ultimately reduce or cost someone their social security benefits and how to avoid them.

Lack of Enough Social Security Credits

According to Social Security Administration (SSA), one must earn at least 40 credits to qualify for Social Security benefits. The total made credits determine eligibility for survivor, retirement, or disability benefits. In 2023, one can earn one credit for every $1640 annual earnings. Four credits are the maximum one can make in one year. The number of points after the minimum limit does not determine the amount one can receive in benefits. Earning the minimum points before retirement is advisable to have a fair share later in life.

Mistakes With Spousal Benefits for Divorced Persons

Divorced people are eligible to claim spousal Social Security benefits based on the earnings of their ex-spouse. However, to qualify for the benefits, one must not be remarried, be over 62, and have lower benefits earnings than their ex-spouses. The marriage must have lasted for over 10 years. The divorce decree must be effective for two years before the claim.

Claiming Too Early

Most people believe in claiming Social Security benefits once their retire at 62. They disregard the full retirement age, 67, for people born later than 1960. At 62, one can only get a permanently reduced benefit. Claiming at full retirement age means receiving 100% of the benefit. However, benefits can increase to 124% if you push your claiming date to age 70. This means that the longer you wait to claim your Social Security benefits, the higher you receive.

If you receive benefits payments much early and feel it was not your best decision, you have 12 months to withdraw. However, you will be required to pay back the received payments, but no interest is imposed.

Retiring in Certain Foreign Countries

After working for many years, some U.S. citizens travel and sometimes choose to reside outside the United States. You may continue receiving benefits payments in most countries. However, some countries are restricted, and one may not receive their benefits if they visit or live in these countries. They include Belarus, Azerbaijan, Kazakhstan, Cuba, Kyrgyzstan, Moldova, Tajikistan, North Korea, Turkmenistan, and Uzbekistan. However, some exceptions may be available in the District of Columbia, the U.S. Virgin Islands, American Samoa, Guam, and the Northern Mariana Islands but not in North Korea or Cuba. Check the Payments Abroad Screening Tool to determine whether you can receive benefits in the country you want to retire.

Failing to Pay Self-Employment Tax

Self-employed workers are responsible for reporting their earnings every subsequent year on th April 15. Self-employed taxpayers need to be made aware that late filing does not only impose penalties on them but also puts them a risk of missing out on Social Security benefits. Tax returns must be filed within 3 years To earn credits on reported wages. Filing after three years may affect qualification criteria or significantly reduce the payments. To avoid late payment of self-employed tax, ensure returns are filed within three years of April 15 deadline.

Bottom Line

Social Security benefits are a core source of income for many Americans. Getting the highest benefit possible depends on how well you understand the Social Security program. Avoid mistakes that could cost you your payments.