Americans planning to take retirement payments from Social Security should tread carefully, as paperwork mistakes are unfortunately common. According to the U.S. Social Security Administration, the agency made about $13.6 billion in improper payments in 2022, with $11.1 billion in overpayments and $2.5 billion in underpayments.
If you’re underpaid by Social Security and unaware of it, you won’t get the payouts you earned. If you’re overpaid, the SSA will eventually discover the error and request that the money be repaid. “Next to the home, Social Security is typically a person’s largest asset headed into retirement, so it’s vitally important to make sure the math is correct,” said Paul Tyler, chief marketing officer at Nassau Financial Group in Port Chester, New York, in an email.
That’s why you should regularly track your annual earnings and determine the amount you will receive from Social Security in retirement. Incorrect or omitted earnings could cause you to miss thousands of dollars in retirement benefits. Here’s how to uncover mistakes and take action to correct them.
[READ: How Raising the Retirement Age Could Help or Hurt Seniors]
What Is a Social Security Earnings Record?
Your Social Security earnings record lists all the earnings under your name and Social Security number reported to the Social Security Administration.
This earnings record will be used to calculate your Social Security payments. Your Social Security earnings report is broken down by year on your annual Social Security statement.
Check Your Social Security Statement
Make a habit of verifying your Social Security statement annually for accuracy. The most common errors on a Social Security statement are incorrectly reported earnings and personal information.
“Start by reviewing your basic personal information,” said Michael Berkhahn, a certified financial planner at Graham Capital Wealth Management in Tampa, Florida, in an email. “Verifying that your date of birth is accurate is important as this determines an individual’s full retirement age.”
“Your Social Security benefits are based on your 35 highest earning years, so verifying that your annual earnings history is correct is extremely important in determining your benefits,” Berkhahn added.
An hour spent checking records is well worth the investment. “You can go to ssa.gov/myaccount and pull up your full earnings history,” said Tom Hager, a retired certified public accountant and founder of the Social Security advisory platform Mister Social Security in Kent, Ohio, in an email.
As you review your statement, don’t dismiss any error as too small. “The net present value of the average American’s Social Security benefits is around $250,000,” Tyler said. “That assumes the average monthly benefit is around $1,800 (and) a person starts taking Social Security around age 67 and lives to about 85. If you live longer, it could be worth even more.”
[READ: What Is the Maximum Possible Social Security Benefit in 2024?]
Contact the Social Security Administration
When disputing an error on your earnings statement, you’ll need to provide proof to support your case. Submit tax documents such as W-2s or 1099 forms from employers and bank statements showing direct deposits from work or self-employment income.
“That’s why it’s important to keep these records as they serve as evidence of your earnings and are necessary when correcting any errors on your Social Security statement,” said Michael Collins, CEO at WinCap Financial in Winchester, Massachusetts, in an email.
Once you have your records and paperwork ready, call the Social Security Administration at 1-800-772-1213 or visit an office rather than reaching out through its website, Hagar suggested.
Waiting for Your Statement Correction
Unfortunately, there’s no set timetable for the Social Security Administration to rectify errors and omissions.
“Errors typically take 10 to 90 days, depending on the backlog, so it can take a while to get fixed, which is why it’s very important to review your statements regularly,” said Colin Ruggiero, cofounder at DisabilityGuidance.org, an organization that works with disabled Americans seeking Social Security financial assistance, in an email.
Note that if the incorrect earnings are for the current or previous year, your record may still be in the process of updating, and the issue may resolve itself.
High Earners Can’t Include All Their Earnings
Social Security has capped taxed earnings, and that cap plays an instrumental role in calculating payments. According to the SSA, the 2024 maximum earnings considered taxable by Uncle Sam stand at $168,600, up from $160,200 in 2023. The tax cap figure can be considerable for Social Security earners. For instance, in 2000, that figure was only $76,200.
[READ: How Much You Will Get From Social Security.]
What if My Employer Did Not Report My Earnings to Social Security?
Your employer must report earnings for every year of your career, as SSA calculations are based on career years in which you earn the most. If an employer does not correctly report one year of earnings to the Social Security Administration, your future payments could be about $100 per month less than you are entitled to, according to the Social Security Administration. Over a lifetime, one year of unreported pay could cost you tens of thousands of dollars in retirement benefits.
More from U.S. News
Retirement Accounts You Should Consider
What Retirement Savers Need to Know About the SECURE 2.0 Act in 2025
Should You Draw $1K From Your Retirement Account?
How to Correct Your Social Security Earnings Record originally appeared on usnews.com
Update 08/28/24: This story was published at an earlier date and has been updated with new information.
