You’ve worked hard for your 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 monthly 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 Groups Who Cannot Rely on Social Security Benefits“:
“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. Such workers 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.”
Having a pension from non-covered work could trigger the windfall elimination provision, and that could reduce the amount of Social Security benefits you receive from other employment.
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 won’t be 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 in which 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 monthly payments.
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 the federal government generally deducts Medicare premiums from a retiree’s Social Security payments.
In 2012, people paid $99.90 per month for Medicare Part B, which covers outpatient services. By 2022, that premium hit $170.10 for most people.
The good news for 2023 is that premiums dropped to $164.90 this year. However, higher earners pay more — between $230.80 and $560.50 per month, depending on their income.
5. Claiming retirement benefits early
Claiming your Social Security benefits earlier than your full retirement age (an age that’s 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, that is going to reduce the size of your potential 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 what the SSA considered full retirement age, the government has been slowly moving the goalposts as Americans have been living longer.
Now, if you were born between 1943 and 1954, your full retirement age is 66. That figure then increases by two months each year (for example, 66 and 6 months for those born in 1957) until reaching the full retirement age of 67 for all of 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 2023, if you are younger than your full retirement age but old enough to have started taking Social Security, you can only earn up to $21,240 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 in 2023, you can earn up to $56,520 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 outside your Social Security benefits. In addition, any benefits withheld earlier 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 your Social Security benefits to pay 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 2022 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 ongoing retirements of the largest generation in U.S. history, the baby boomers, are challenging the system as the cost of those workers’ benefits grows faster than the amount of payroll taxes the working-age population is paying into the system.
At the current rate, after 2034, the program will only have enough income from employed workers to pay 77% of Social Security benefits, the report notes.