Social Security, although originally intended to be a supplement to Americans’ retirement income, has become a major source for many. The Center on Budget and Policy Priorities found that half of senior citizens get 50% of their income from Social Security and that 1 in 4 seniors receive 90% of their retirement income from Social Security.

A new Transamerica study says that the median savings balance among baby boomers is just $144,000-not nearly enough when a person is expected to live 20-30 years after retiring-and they will be relying heavily on Social Security for retirement income.

Given those numbers, you want the biggest Social Security benefit possible. Here are 4 mistakes that guarantee a smaller Social Security paycheck than you might otherwise receive.


Work less than 35 years

Your Social Security benefit is based on an average of your highest 35 years of earnings. For every year you don’t work, a zero is entered for that year, lowering your average income and guaranteeing a smaller Social Security payout.


Retire before full retirement age

Full retirement age (FRA) these days is between 66-67, depending on the year you were born. When you retire at your FRA, you’re entitled to a full Social Security payout. Retire earlier than FRA and you’ll receive a permanently reduced benefit—guaranteeing less money than you could have received.


Delay benefits past age 70

You don’t have to sign up for your Social Security benefits at full retirement age (FRA). In fact, for every year you postpone receiving benefits past FRA you get an 8% increase in what you’ll receive. They’re called delayed credits. You’ll get those credits beginning at FRA all the way to age 70 when the increase caps out. If you delay receiving Social Security past age 70, it could mean leaving money on the table, money that could have been yours.


Retire in a state that taxes your Social Security

Depending on your income, you may pay federal income taxes on 50%-85% of the Social Security you receive. There’s nothing you can do about that. But if you want to guarantee a smaller Social Security payout, retire in a state that taxes your Social Security. There are currently 13 states that tax some or all of your benefit.

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • North Dakota
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia


States that have no income tax are:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming


While Tennessee and New Hampshire have no state income tax, they do tax interest and dividends. However, that tax will disappear in Tennessee at the end of 2020 and in New Hampshire at the end of 2021 making them completely income tax free.