For many people, Social Security serves as a critical source of retirement income. And if you're in that boat, a smaller monthly check than expected could really upend your finances. But here are a few reasons why you may end up with less money from Social Security than you thought you would.
1. You took benefits early
You're allowed to sign up for Social Security as soon as you turn 62. However, you're not entitled to your full monthly benefit based on your personal income history until full retirement age (FRA) arrives. That age is either 66, 66 and a specific number of months, or 67 -- it depends on your year of birth.
Now, the earlier you file for Social Security ahead of FRA, the more of a hit your monthly benefit will take. As an example, if your FRA is 67 and you sign up at 62, you're looking at reducing your monthly payments by a whopping 30%. That's an important thing to know ahead of your filing.
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2. You filed early and are earning income from a job
You're allowed to earn money from a job and collect Social Security at the same time. And once you reach FRA, you can earn any amount of money without risking having a portion of your Social Security income withheld. But if you haven't reached FRA and are working, you'll be subject to an earnings-test limit.
This year, earnings beyond $22,320 will put you at risk of having some of your Social Security income withheld, resulting in smaller monthly checks. That limit rises to $59,520 if you'll be reaching FRA in 2024 but aren't there yet.
The good news is that withheld Social Security benefits based on exceeding the earnings-test limit are repaid to you once FRA arrives. But that doesn't help you if your benefit checks are smaller than you need them to be for a period of time.
3. You're losing some of that money to Medicare premiums
Medicare eligibility begins at age 65. If you're receiving Social Security at the time of your Medicare enrollment, your monthly Part B premiums will be paid out of your monthly benefits automatically. The result? Smaller checks for you.
It's also worth noting that the cost of Medicare Part B has the potential to rise over time. In 2024, for example, the standard monthly Part B premium went up to $174.70 from $164.90.
Know the rules
Getting less money than expected from Social Security can deal a harsh blow to your finances. So it's important to understand how the program works and recognize the different factors that might lead to a reduced monthly check, since some of those things may be within your control to avoid.
For example, let's say you're 64 years old and are collecting Social Security while working. You might, in that case, try to specifically limit your earnings to $22,320 to avoid having some benefits withheld. As such, it's really important to know the program's rules inside and out.
