The Federal Employee Retirement System is a plan with different benefits for federal employees in the US. 

Social Security benefits are payments for qualified retirees and people with disabilities. They are a source of post-retirement income that ensures financial security and stability for federal retirees and their dependents. 

However, there is a significant knowledge gap for US people related to the Social Security Benefits. 

Several studies indicate – 

• 39% of federal employees are unaware of the age eligibility to receive the benefits. 
• 30% of people do not know that Social Security benefits cover the expenses for eligible spouses and children. 
• 37% of federal employees think that Social Security benefits are unprotected from inflation. 

Several factors play a crucial role in maximizing this type of benefit. It includes timing, retirement age, taxes, and spousal considerations. 

While making mistakes is common, people can easily avoid them to enjoy maximum benefits from Social Security. 

In this blog, we will navigate the top 7 mistakes that may reduce your Social Security benefits. Making informed decisions not only optimizes financial support for retirement but also helps to evade the pitfalls. 

The Social Security Administration is an independent organization of the US federal government that designates Social Security numbers for federal employees and moderates the Social Security retirement program for eligible retirees, survivors, and disability insurance programs. 

Social Security is a source of retirement income for eligible retirees, disabled federal employees, and their families. It is a part of the FERS plan. 

Employees need to make regular contributions to this account through payroll deductions regulated by their employers. 

Furthermore, employers contribute a part of your income into Social Security accounts. Contributions to this type of account are only allowed as long as a person is employed with the US federal government. However, it is mandatory to gather 40 credits during their service years to qualify to receive the benefits. Credits are awarded to employees for every $1730 earned in 2024 and $1810 in 2025 from the Social Security account. 

The amount distributed from the Social Security benefits is based on the candidate’s earnings, history, birth year, and age of the first claim. A Social Security benefits calculator helps employees determine their full retirement age, estimate life expectancy for benefit calculations, rough figures for retirement benefits, and actual projections of retirement income based on the work record. 

Lastly, it is crucial to note that Social Security benefits are taxed based on the individual’s income and tax filing status. 

The payroll tax cap includes the maximum amount of earned income from Social Security contributions. The 2025 tax cap is $176,100. 

Federal retirees are eligible to receive Social Security benefits when they reach the age of 62 years. However, waiting until 70 years to collect the benefits provides an 8% increase from 62-70 years. 

The maximum monthly Social Security payment in 2025 is $4,018.

Read Also: Everything Retirees Need To Know About Tax Brackets in 2025

Get a glimpse into critical mistakes that may significantly reduce retirement income and Social Security benefits – 

1. Early Benefit Claims

Claiming your Social Security benefits at an early age negatively impacts your retirement income. Here is how – 

Early Retirement Age Reduces Payments

The appropriate age for claiming Social Security benefits is 62 years. However, all claims from participants before this age reduce payments by up to 30%. 

Impact of Claims Before FRA

Reduced benefits are directly proportional to decreased financial stability during retirement. Furthermore, early claims also reduce spousal and survivor benefits. 

Tips To Determine Optimal Claim Time

Participants need to identify their financial needs, health status, and life expectancy. Also, it is essential to consider the withdrawal age. For example, waiting until the FRA or up to 70 years maximizes the monthly payments. Utilize calculators to determine how claiming at different ages influences income.

Also, talk to a federal retirement financial advisor to create a personalized strategy to achieve retirement goals. 

2. Negligence of Full Retirement Age (FRA)

Find out how ignoring the full retirement age reduces Social Security benefits – 

FRA Calculation According To Birth Year

The full retirement age is the year in which a federal employee or retiree is eligible to derive 100% of their Social Security benefits. The FRA is different for every individual based on their birth year. 

For example, the FRA for a person born between 1943 – 1954 is 66 years while the FRA for people born in 1960 or later is set at 67 years. It is a crucial factor to consider in your retirement planning as claiming the Social Security benefits any time before this age results in deductions. 

Wait Until FRA To Maximize Benefits

Claiming benefits from the Social Security account any time before the FRA results in a permanent reduction of monthly payments. Contrarily, if participants wait until the FRA, they get full benefits from the Social Security account. Ignoring the FRA can lead to a heavy loss in overall retirement income. 

Effect of Delayed Retirement Credits

Delaying the claim for Social Security benefits beyond the FRA up to 70 years results in an 8% increment of the benefit amount every year the claim is delayed. This increases the retirement income. 

3. Impact of Employment on Benefit Claims

Get a glimpse into how claiming the Social Security benefits during employment affects retirement income – 

Overview of Earnings Limit

The earnings from a Social Security account are reduced to annual limits if claims are made before reaching the FRA and during active employment. The annual limit for Social Security benefits payments for candidates below the FRA in 2025 is $21,240. This limit is no longer applicable once the person reaches the full retirement age. 

Excess Earnings May Reduce Benefits

$1 is temporarily withheld from Social Security payments for every $2 earned more than the annual limit. The temporary reduction is decreased to $1 for every $3 earned in excess during the FRA year. It is pivotal to understand that these benefits are not lost but added back to account once the candidate reaches the FRA.  

Best Strategies To Balance Benefits with Work Status

Glance through the best strategies – 

• It is best to delay the benefits claim until the FRA if the income exceeds the earning limit. 
• Determine retirement income by identifying the number of work years to stay within the limit and avoid unnecessary claims. 
• Learn the difference between long-term financial growth and short-term reduction of benefits. 
• There are no earnings limits for candidates who reached their particular FRAs.

4. Ignorance of Spousal or Survivor Benefits

Learn what may happen if a candidate fails to consider their spousal and survivor benefits – 

Insights into Spousal Benefits

This facility enables spouses to claim 50% of the higher-earning benefits. To avail of these benefits, candidates need to be at least 62 years old and their marriage term should be a minimum of 10 years. 

Insights into Survivor Benefits for Widows and Widowers

This is a source of financial support for widows and widowers. Eligible candidates can claim the entirety of the deceased participants’ benefits if they wait until the FRA. Furthermore, these benefits can be accessed as early as 50 years old for disabled participants. 

Best Coordination Strategies

Here are some important strategies to avoid this type of mistake – 

• Do not overlook the spousal benefits as it significantly reduces household income. 
• Do not claim the survivor benefits early unless an emergency arises as it permanently reduces the monthly payments. 
• Divorced candidates who have been married for a term of 10 years can claim spousal benefits on the terms of their ex-spouse’s records. Most spouses are unaware of this facility.

Read Also: Premier Federal Retirement Planning Services in California – Secure Your Financial Future with Expert Guidance!

5. Disregard of Tax Implications on Social Security Benefits

Here is a glimpse into the tax regulations for Social Security benefits – 

Social Security Benefits Taxations According to Income Levels

The taxation from Social Security benefits depends on the total income of the participant. This income is also known as provisional income. An interesting fact highlights that up to 85% of the benefits from this account are taxable if the income exceeds a particular threshold. 

Overview of Provisional Income and Thresholds

Provisional or total income includes – 

• Adjusted Gross Income (AGI) 
• Non-taxable interest 
• Half the amount of yearly Social Security benefits payments 

Get a glimpse into the upper limits of Social Security benefits taxable by the federal government – 

• Single Filers – Filing for up to $25,000-$34,000 from Social Security benefits is 50% taxable. Claiming for more than $34,000 results in 85% taxation of the benefit payment. 
• Married Couples Filing Together – Couples claiming jointly for $32,000-$44,000 will face 50% tax deductions from the benefits amount. Conversely, claiming above $44,000 will lead to 85% tax deductions from the Social Security benefits. 
• Married People Filing Separately – Social Security benefits are taxed if the couple lived together in the year of the filing. 

Tips to Reduce Tax Liabilities on Benefits

Here are the best tips to minimize tax implications on Social Security benefits – 

• Limit the withdrawals from taxable retirement accounts to maintain the low-income threshold. 
• Convert a part of the Traditional IRA and Thrift Savings Plan (TSP) accounts into ROTH accounts as the income generated is not taxable during withdrawal. 
• Postpone Social Security benefits claims to reduce taxable benefits. 
• Invest in tax-advantaged accounts that generate less taxable income. 
• Plan Required Minimum Distributions (RMDs) strategically from traditional retirement accounts to ensure it does not exceed the income threshold.
  

6. Forsaking Error Corrections in Earning Records

Explore what happens when an eligible federal retiree fails to modify errors in their Social Security records – 

Regularly Evaluate the Social Security Statements

Lifetime earnings are considered to calculate the Social Security benefits. Errors in these records reduce the benefits and payment calculations. This may result in a loss of several dollars. Cross-checking the account statements confirms the earnings are accurate and benefits are calculated based on true employment history. 

Earnings Record Errors Reduce Benefits Amount

The Social Security Administration (SSA) determines 35 years of highest earnings to calculate benefits amount. Incorrect or missing records lead to – 

• Reduced average monthly earnings. 
• Exclusion of the highest earning years and replacement with low earning years. 

Some of the common reasons why errors happen include – 

• Failure of employers to report correct earnings. 
• Marriages or divorces where participants change their names but do not update with the SSA. 
• Incorrect Social Security number on the payroll. 

Tips To Fix Inaccuracies with Social Security Administration

Loom into the best strategies to fix Social Security statement errors – 

• Review annual earnings based on tax records or W-2 forms. 
• Monitor discrepancies or missing income years. 
• Collect earning proofs including W-2 forms, pay stubs, and tax returns. 
• Contact the SSA through their phone number or visit the local Social Security office. 
• Fill out the SSA-7008 form for submitting an earnings record modification request. 
• Regularly follow up with the SSA to ensure the errors are resolved.
  

7. Lacking Proper Retirement Strategies

Improper or no Social Security planning significantly affects retirement income. Here is how – 

Risking Social Security as the Only Source of Retirement Income

Social Security benefits are a source of supplementary retirement income and participants should not solely rely on future expenses from this source. The monthly payouts are feeble to cover the basic living expenses. Rising inflation and healthcare expenses could lead to financial stress for people who solely rely on Social Security as a source of retirement income. 

Merging Social Security Benefits with Other Income Sources

Federal employees and retirees can ensure financial stability by combining their Social Security benefits with other retirement income sources including pensions, personal savings, and investments. Other sources of income could be TSP, IRAs, 401(k)s, annuities, rental property income, and part-time work. Plan for strategic withdrawals from other sources to maximize Social Security benefits. Furthermore, tax-advantaged plans can reduce taxable income from distributions. 

Plan for Longevity & Healthcare Expenses

As the expected lifespan of people is increasing, there is a chance to outlive retirement savings. Delayed claims are one way to a sustainable retirement. 

Healthcare costs are rising as well. This means that Medicare premiums and out-of-pocket expenses are rising too. Prepare for long-term care insurance, and health savings accounts, and create a medical emergency fund to optimize expenses in the long term.  

Consulting a financial planner for federal employees streamlines Social Security benefits with retirement goals.

Read Also: Your Federal Retirement, Optimized – Trusted Financial Advisor for Federal Employees in New York

With a clear understanding of how to maximize your Social Security benefits, participants can effectively avoid pitfalls. 

Avoid early claims, do not claim during active employment, stay updated on spousal and survivor benefits, and regularly monitor Social Security account statements. 

PSR Assurance offers specialized financial services for federal employees in Puerto Rico to safeguard retirement income, reduce tax liabilities from Social Security, and maximize the long-term growth of benefits.

Do not let your hard-earned money go in vain due to a lack of knowledge. Talk to us and make the most of your retirement goals.