CNNMoney.com said the Social Security Office of the Inspector General's estimate is based on a sample tested during a 2008 audit.
Family members or funeral directors usually notify the Social Security Administration of a person's date of death and the information is posted onto the agency's Death Master File, which is a database containing 87 million death records, the report said.
Failure to report the death of family member and continuing to receive payments could result in fraud charges.
In thousands of cases, however, the agency received notice of the recipients death and continued to make erroneous payments. The OIG estimates one in every 200 deaths is entered incorrectly in the Death Master File. Nearly 2,000 deceased beneficiaries were found to have received benefits after the agency was notified of their deaths.