You’ve worked hard for Social Security retirement benefits, and you probably want every dollar you’re entitled to receive.
Unfortunately, the sad reality is that there are reasons why your Social Security payments could decrease. Many are in your control, but some are not.
Keep reading to find out how your monthly check could get dinged for everything from poor timing on your part to poor planning on the government’s end.
1. Failing to catch incorrect wage information
Social Security benefits are based on your lifetime earnings record. If the government doesn’t have the correct wage information for you, the result could be a smaller Social Security check.
To make sure the government has the right info on your wages, sign up for your own account at the Social Security Administration (SSA) website. Among other things, you can use the account to review your earnings history.
For more on Social Security accounts and earnings histories, check out “9 Social Security Terms Everyone Should Know.”
2. Receiving some types of pensions
Some workers may not be eligible for Social Security as a result of the nature of their employment. As we report in “6 Types of People Who Can’t Count on Social Security“:
“Not every worker pays into the Social Security system. In certain states, public employees are not covered by Social Security due to receiving a pension. They can include employees of state and local government agencies, including school systems, colleges and universities. In some states, they may also include police officers and firefighters.”
3. Missing the Medicare application window
While the full retirement age for Social Security has been slowly changing, the age for Medicare eligibility has remained the same. That means that even if you aren’t applying for Social Security until age 66 or later, you need to apply for Medicare at age 65.
Failure to do so could result in late enrollment penalties. For instance, Medicare Part B premiums are 10% higher for every 12-month period a person fails to sign up for Medicare coverage when they are eligible. Because Medicare payments generally are taken from your Social Security benefit, this could lower your Social Security benefit each month.
4. Rising Medicare premiums
Even if you apply for Medicare on time, you could find that your Social Security payments take a hit from rising Medicare premiums. That’s because Medicare premiums generally are deducted from Social Security payments.
In 2012, people paid $99.90 per month for Medicare Part B, which covers outpatient services. For 2020, that premium is $144.60 for most people, with high earners paying more — between $202.40 and $491.60, depending on their income.
5. Claiming retirement benefits early
Claiming your Social Security benefits earlier than your full retirement age (an age set by the SSA) will result in a smaller check going forward. While the government is happy to start sending you monthly checks at age 62, it is going to reduce your monthly payment — possibly by up to one-third or more.
The reduction is permanent, so don’t expect to see a big bump in benefits once you reach your full retirement age.
6. Getting your full retirement age wrong
You may think you’re doing everything right by filing for Social Security benefits at age 65, but filing at that age will reduce your payments as well. Although 65 was long considered the full retirement age, the government has been slowly moving the goalposts.
If you were born between 1943 and 1954, your full retirement age is 66. The number increases by two months each year (for example, 66 and 6 months for those born in 1957) until reaching a full retirement age of 67 for those born in or after 1960.
7. Earning too much income as an early retiree
If you decide to go the early retirement route, you should think twice about continuing to work while receiving Social Security benefits. In 2021, if you are younger than your full retirement age but old enough to have started taking Social Security, you can only earn up to $18,960 before a portion of your benefits is withheld. In that situation, the government reduces monthly benefits by $1 for every $2 earned above that amount.
If you’ll hit your full retirement age this year, you can earn up to $50,520 in the months leading up to your birthday. Exceeding that amount means the Social Security Administration will take $1 for every $3 you earn over the limit.
Fortunately, these aren’t permanent reductions in your benefits. And, starting with the month you reach full retirement age, there is no limit on how much you can earn. In addition, any benefits withheld because of your earnings will be added back to your benefits each month starting at your full retirement age.
8. Owing taxes or child support
The government can also take money from Social Security to pay for back taxes or child support.
9. Defaulting on federal student loans
Thanks to a U.S. Treasury rule, debt collectors for credit cards and other consumer accounts can’t garnish your Social Security benefits. However, that protection doesn’t extend to debts owed to the federal government. If you have defaulted on federal student loans for yourself or loans you took out for a child, some of your Social Security benefits can be withheld to pay off the debt.
10. Outliving the Social Security trust fund
Your Social Security benefits might take a hit if you outlive the program’s trust fund. According to the 2020 Trustees Report, the Old-Age and Survivors Insurance Trust Fund — which pays out Social Security retirement benefits — will run out of cash in 2034.
The retirement of the largest generation in U.S. history, the baby boom generation, is challenging the system as the cost of those workers’ benefits grows faster than the working-age population paying into the system.
After 2034, the program will only have enough income from employed workers to pay 76% of Social Security benefits, the report notes.
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