Saving for retirement is something you shouldn’t leave until the last minute: the longer you wait to begin, the more income you’ll need to put away. Using the power of time, smaller amounts tucked away now will add up to big amounts in the future. But there is one retirement savings plan that all Americans typically have access to: Social Security.
In the U.S., workers have a portion of every pay check deducted to contribute Social Security taxes, which earn them retirement-benefit credits. Once they’ve reached 40 credits (earning a maximum of four per year), they will qualify to receive benefits from the Social Security Administration (SSA) at retirement age.
Four mistakes that can lower your Social Security payment:
The SSA bases an individual’s retirement-benefits entitlement on data gathered throughout their working life, which is formed into an earnings record. This information is then used, with a three-part process, to calculate the size of payments. And there are key factors that can serve to reduce your monthly benefits:
Poor earnings during your working years
When it works out your monthly retirement payment, the SSA uses your 35 highest-earning years throughout your working life to calculate your Average Indexed Monthly Earnings (AIME). While it may be out of your control, or you are comfortable earning less than you perhaps could to enjoy a better quality of life, this may result in lower Social Security benefits come retirement.
Working for fewer than 35 years
Additionally, if you have accumulated fewer than 35 years of earnings that contributed to Social Security, any missing years will be counted as $0 in your benefits calculation, thus reducing your overall average and in turn your potential monthly entitlement. So, you’ll want to think what that sabbatical year could mean years down the road when you sign up for Social Security benefits.
Claiming your retirement benefits too early
You can begin collecting Social Security retirement benefits the month after you turn 62. However, doing so can cost you a large chunk of the benefit you could be entitled to if you hold off on claiming until you reach what’s known as ‘full retirement age’ (FRA). So if you can, you don’t take your benefits too early.
If you were born in 1960 or later and want to receive your full benefits entitlement, you will have to keep contributing to Social Security until you are 67. The SSA has an online calculator that allows you to estimate how much your monthly payments will be reduced by if you begin claiming before your FRA.
On the contrary, if you wait until you are 70 before claiming your retirement benefits, you will receive 8% more for every year beyond your FRA.
Working while receiving retirement benefits
“If you are younger than full retirement age and earn more than the yearly earnings limit, we may reduce your benefit amount,” warns the SSA. “If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.” For 2026, that limit is $24,480. For those are under their FRA for only part of the year, this cap rises: in 2026, it is set at $65,160. For every $3 dollars you earn over that limit, the SSA deducts $1 in benefits.
Starting with the month in which you reach your FRA, there is no income limit: however great or small, your earnings no longer affect your retirement benefits.
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