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CBSMoneyWatch: Social Security Errors That Can Cost You Thousands

Mistake #4: Under-reporting of income by self-employed individuals

Many self-employed people under-report their taxable income for Social Security purposes, or use tax deductions to minimize their taxable income, on the assumption that paying any taxes is bad. But "This can hurt if you want Social Security benefits one day -- including disability benefits, in the case of unexpected illness or accident," Peterson said.

I know a number of self-employed people who've minimized their Social Security taxes over the years and are now reaching their retirement years with little or no retirement savings and severely reduced Social Security benefits. Now they regret this strategy and will need to keep working indefinitely.

According to one analysis, Social Security taxes are actually a good investment, so don't automatically think it's a good idea to avoid paying these taxes.

These are just a few of the mistakes that people routinely make in drawing Social Security. Stay tuned for future posts on how best to use the federal program.

It's well worth your time to learn all you can about Social Security benefits; it can result in increasing the lifetime payout for both you and your spouse by many thousands of dollars.

(iStock)

More From MoneyWatch:
10 Best Places to Retire
5 Social Security Myths that Have to Go
Are Your Social Security Taxes a Good Investment?



The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.

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