3 Reasons Why Your Social Security Check Might Be Shorter Than Expected

Some 68 million Americans receive Social Security retirement benefits each month as of 2024, according to the Social Security Administration (SSA). The average monthly benefit for retired workers is estimated at $1,907, including the year's cost of living adjustment (COLA). It's a sum that represents the primary source of income for some recipients. But there are some common reasons why you may be getting less than you expected.

The change might be due to an offset as a result of outstanding debts or a higher Medicare premium because you have a high income. You may have simply started taking benefits too early.

1. Offsets Shrank Your Social Security Check

One potential factor that can result in less Social Security benefits is an offset. The government can collect money from your benefits if you owe a federal debt or certain state debts. Some debts that can result in an offset include:

• Defaulted student loans
• Food stamp overpayment corrections
• Home loans owed to the U.S. Department of Veterans Affairs (VA)
• Back taxes

Back tax offsets are technically a levy but the concept is similar.

SSA regulations protect the first $750 in benefits you receive but the SSA will reduce your benefits each month by a certain amount until what you owe is repaid if it’s determined that a debt does indeed belong to you. You’ll receive your full benefit amount after an offset for debt is satisfied but you'll have to deal with the temporary shortfall until then. 

2. Early Benefits Shrank Your Social Security Check

The full retirement age for Social Security purposes is either 66 or 67 for those retiring in the 2020s. The exact age depends on the year when you were born. But it's possible to begin taking your Social Security retirement benefits as early as age 62. This can give you some financial relief if you’re strapped for cash but there's a tradeoff. The size of your benefits automatically and permanently go down.

The Nationwide Retirement Institute (NRI), a subsidiary of the Nationwide Mutual Insurance Company, surveyed 1,727 U.S. adults age 24 and over in 2020. It found that three in four Baby Boomers (80%), the vast majority of Gen Xers (90%), and almost all Millennials (97%) incorrectly identify the age at which they're eligible for full retirement benefits.

Only 45% of Millennials, 49% of Gen Xers, and 69% of Baby Boomers correctly understood that their benefits are permanently reduced if they take Social Security early. The remainder of the respondents incorrectly believed that benefits would be increased to the full amount upon reaching their full retirement age.

Say you’re entitled to $1,000 in benefits per month. You’d only get $700 per month if you were to claim Social Security at age 62 years old but you won't reach full retirement age until you're 67. That check would be lower for life.

But you’ll get an extra 8% each year starting with your full retirement age if you wait until you're age 70 to begin collecting Social Security benefits. Claiming after age 70 doesn’t increase your benefits further, however, so there’s no reason to wait any longer.

3. Medicare Premiums Shrank Your Social Security Check

You're eligible to enroll in Medicare the year you reach age 65. The sign-up window is seven months long beginning three months before you turn 65 and ending three months after the month in which you turn 65. There's an open enrollment period from Oct. 15 through Dec. 7 each year.

Your premiums are deducted from your Social Security benefits if you sign up for Medicare Part B. The standard monthly premium for Part B enrollees is $174.70 in 2024 but it’s possible that you could end up paying more if you earn above a specified threshold.

Single filers with incomes greater than $103,000 in 2024 and less than or equal to $129,000 may pay an average of $244.60 per month. The average price continues to rise until you reach an income of $500,000 or more. You could pay $594 per month in that case.

“If your income has recently dropped, you may appeal to the SSA for a lower premium. The IRS may be providing the SSA with older data that needs to be updated,” said James B. Twining, CFP, founder, and CEO of Financial Plan Inc.

The hold-harmless provision also protects beneficiaries from a reduction in their previous year's benefit level due to an increase in Part B premiums. There are requirements to qualify for this:

1. "You are entitled to Social Security benefits for November and December of the current year;
2. The Medicare Part B premium will be or was deducted from your Social Security benefits in November of the previous year through January of the current year;
3. You do not already pay higher Part B premiums because of Income-Related Monthly Adjustment Amount (IRMAA) eligibility;
4. And you do not receive a Cost of Living Adjustment (COLA) large enough to cover the increased premium."

The hold-harmless provision doesn't apply if:

1. "You are new to Medicare in 2023. Hold harmless does not apply to you because you have not been enrolled in Medicare Part B long enough to qualify.
2. You are subject to IRMAA.
3. You are enrolled in a Medicare Savings Program (MSP). However, the MSP should continue paying for your full Part B premium.
4. You were enrolled in a Medicare Savings Program in 2022 but lost the program because your income increased or you failed to re-certify."

Other Factors Affecting Your Social Security Check

It could substantially impact what you receive from Social Security, at least until you reach full retirement age, if you retire before full retirement age and your income goes up instead of down for some reason. Maybe you sold off a high-value asset, you started a profitable business, or you earned a lot as a consultant or a freelancer.

A Word About Reserves

The Social Security fund is replenished each month with payroll taxes from workers but the fund’s resources aren't infinite. It could run out of money.

Retirement benefits will be fully paid on schedule until 2034, according to a 2024 report by the SSA. The trust fund’s reserves are expected to be exhausted after 2033, and only 79% of the scheduled benefits will be able to be paid from continuing tax income at that point. Congress will have to take action to keep Social Security solvent and sustainable over the long term.

The Bottom Line

Relying on Social Security to see you through retirement can put you on thin ice financially. It becomes even trickier when you’re getting less money than you budgeted to receive. Taking the time to clear up any outstanding debts, weighing the cost of taking benefits early, and looking at how your income stands to affect your benefits can help you avoid any surprises when your Social Security checks start rolling in.

It pays to crunch the numbers to see how much you stand to lose by doing so if you're thinking of taking benefits early.