The Quiet Social Security Error That Could Mean Smaller Checks in Retirement

There are many older Americans today who depend on Social Security benefits for a stress-free retirement. So the larger those monthly checks are, the easier it might be to pay your expenses through the years.

There are a number of things you can do to score larger Social Security benefits in retirement. You could delay your claim past full retirement age or coordinate filing strategies with your spouse to collect a greater amount of Social Security income at the household level.

But a big part of getting more out of Social Security means avoiding money mistakes that could shrink your monthly benefits when you deserve to get more.

Incorrect wage reporting could hurt you

Your Social Security benefits are calculated based on your 35 highest-paid years of income. This means that if you have lower income reported in a given year than what you actually earned, or if you have years of missing earnings, it could result in smaller monthly checks.

Let's say that in 2019, you earned $64,000 in total, but you switched employers during the year so that you earned $44,000 from one company and $20,000 from another. If the Social Security Administration (SSA) is missing earnings from that second company, that's $20,000 of wages that aren't going to be counted toward your total earnings record.

Now if you end up working more than 35 years and your 2019 wages end up being among your lowest on record, that missing $20,000 may not matter. But if you only end up with a 30-year wage history and your earnings never end up topping $80,000 a year, then a missing $20,000 one year is a bigger deal.

Checking your Social Security earnings is crucial

If you want to know what wage information the SSA has on record for you, all you need to do is create a my Social Security account. Once you do that, you can access your earnings statements and see what wages are recorded.

If you see that your wages are incorrectly reported, you may be able to request a correction to your earnings record online through your my Social Security account. You can also contact the SSA at 1-800-772-1213 for more information.

You should know that you can usually request an earnings record correction up to three years, three months, and 15 days from the end of each tax year. But there are several exceptions that allow you to make a correction beyond that deadline.

For example, the SSA allows you to correct your record after that time to include wages reported by an employer that are not in the agency's records. So if you have a W-2 from five years ago and the SSA is missing that information, you should be able to request a correction even though you're beyond that initial correction window.

Staffing cuts could make it harder to correct inaccurate wages

Over roughly the past 15 months, the SSA has laid off more than 8,000 workers. That amounts to a 14% reduction in the agency's total staff, according to the Center on Budget and Policy Priorities.

Because the SSA has even fewer customer service representatives available these days, it's important to be vigilant about monitoring your earnings record. It may take longer to correct an inaccurate record due to more limited SSA staff, so the sooner you report a mistake, the better.

Keep tabs on your wage record ahead of retirement

You may not think to check your earnings record on the SSA's website until you're gearing up to retire and start collecting benefits. But your best move is to monitor your earnings statement every year.

Think about it this way. If you check your 2024 earnings statement in 2039, are you really going to notice right away if there's an inaccuracy? You might notice if the SSA has $0 income on file for you that year and you worked full time. But if your total wages were $98,000 and the SSA lists $91,000, will you notice that mistake 15 years later?

On the other hand, if you check your 2024 earnings statement this year, you're more likely to catch a mistake if your wages were underreported by even a few thousand dollars, such as if bonus pay wasn't recorded. So it's a good idea to schedule a recurring meeting on your digital calendar to review your earnings record every year.

Bottom line

Once you stop working, your Social Security benefits will probably play a big role in your retirement plan. So it's important to do what you can to set yourself up with decent-sized checks.

It's one thing to end up with less Social Security because you intentionally filed for benefits early. It's another thing to end up with smaller monthly Social Security checks because you simply didn't check your earnings record and request corrections. So if you want to make sure you end up with the monthly benefits you're entitled to, take the time to review your wage history and/or contact the SSA as needed if your earnings are underreported.