Millions of Americans are counting on Social Security to see them through retirement. You might be among them. But what would you do if the check you get from the government turns out to be not quite as big as you expected?
A smaller Social Security check is a real possibility that few people are ready to deal with. But the truth is your retirement benefits could shrink for any number of reasons, from unpaid debts to too-high earnings. And then there’s the looming threat of a Social Security crisis. While the government hasn’t made any moves to change the way it pays out benefits, it’s possible today’s workers could get less than they were initially promised if cuts are made to Social Security.
Don’t panic just yet though. Chances are your benefits are secure. But if any of the following 10 situations applies, you could be looking at a smaller Social Security check than you expected.
1. Your earnings record is incorrect
The government determines your Social Security benefit based on your earnings record. If your earnings record is wrong, your check could be lower than you expected. Earnings records mistakes can be caused by all kinds of errors. For example, an employer could have reported your wages incorrectly or used the wrong Social Security number. Or a name change could have resulted in an incorrect record. Whatever the cause of the mistake, you need to fix it, or you risk losing out on benefits.
To check your earnings records and determine whether you need to correct an error, you can create a my Social Security account online. This will give you access to your complete earnings record, so you can verify its accuracy. Generally, you only have three years to correct your earnings, so it’s important to keep tabs on your earnings and fix any issues that arise.
Next: The earnings test
2. You earned too much money
Often, people who retire early continue to work while drawing Social Security benefits. But what some retirees might not realize is signing on for those extra shifts can mean a smaller check from Social Security.
People who retire before their full retirement age (between age 66 and 67, depending on your birth date) are subject to what’s known as the “earnings test.” Under this rule, you’ll lose $1 in benefits for every $2 you earn over $16,920 (in 2017). You’ll need to report your expected earnings to Social Security every year, and it’ll adjust your payments accordingly. If you make a mistake when estimating your earnings, Social Security will withhold future benefits until you’ve paid off what you owe.
Next: Medicare premiums
3. Your Medicare premiums went up
Medicare premiums are typically paid out of your Social Security check. If your premiums change, so will the amount of your monthly retirement benefit. For most retirees, premium increases aren’t an issue because there’s a “hold harmless” rule that says your Social Security can’t get any smaller because of an increase in Medicare Part B costs.
However, the hold harmless rule doesn’t apply to high-income retirees (individuals making more than $85,000 a year or married couples earning more than $170,000). Those people are subject to Medicare surcharges, which can gradually increase their premiums to as much as $428 a month. Surcharges rise every year, and they increase along with your income. In addition, retirees at all income levels could see their Social Security benefit shrink if they switch to a Medicare Part D plan with a higher premium.
Next: Student loans
4. You’re in default on your student loans
Debt collectors have to keep their hands off your Social Security benefits — unless they’re the government, that is. Retirees who’ve stopped paying back their federal student loans may lose up to 15% of their total monthly check. Currently, about 114,000 Americans over 50 are losing an average of $140 a month because of unpaid educational debt.
The garnishments will only start once your loans have gone unpaid for nine months. If you’re running into trouble paying back your loans and fear your government benefits might be in jeopardy, talk to your loan servicer about what you can do to avoid default. You might be able to switch payment plans, request a temporary forbearance, or even get your loans discharged (if you’re totally disabled).
Next: Tax cheats
5. You didn’t pay your taxes
Tax cheaters can also lose out on their Social Security benefits. If you owe money to the IRS, the government is allowed to withhold up to 15% of your Social Security check to pay the balance due.
Not only can the government garnish your Social Security to pay back taxes, but the law allowing it to do so has a special twist. While the first $750 of your benefit is untouchable if your check is being garnished to pay student loans, that’s not the case if you’ve stiffed the IRS. In that case, the government can take 15% of your monthly benefit even if it means you’ll get less than $750.
Next: Unpaid child support
6. You owe child support
Deadbeat dads and moms, watch out. Your Social Security check can be garnished to cover your child support obligations, as well as unpaid alimony. As much as 65% of your total check could be withheld.
Having full-grown kids doesn’t necessarily erase your child support debts. Your check could be garnished even if your children are now adults, noted Money. Both Social Security disability and retirement benefits could be garnished to pay your debts, though Supplemental Security Income is off limits.
Next: Government pensions
7. You get a government pension
Workers who get a government pension may be in for a nasty surprise at retirement. If you get retirement benefits from a job where you didn’t pay into Social Security, you might be subject to the Windfall Elimination Provision.
Here’s how it works. Let’s say you spent most of your career working as a teacher and did not pay Social Security tax on your earnings. You also spent some time working at companies where you did pay into Social Security. To avoid the possibility of you getting “extra” benefits, the Social Security Administration may adjust your Social Security benefit downward.
Unfortunately, the Social Security Administration won’t necessarily know you’re eligible to receive a pension, so the benefit estimates you received in the mail or online might not be accurate. To get a rough idea of your real benefit, you’ll need to use the WEP Online Calculator.
Spouses and survivors, meanwhile, need to watch out for the Government Pension Offset. This rule reduces Social Security benefits for widow(er)s and spouses who also get pension benefits.
The rules surrounding the Windfall Elimination Provision and the Government Pension Offset can be confusing. If you have questions, check with Social Security or a financial professional.
Next: Getting remarried
8. You’re divorced or widowed and get remarried
Divorcees and widows can draw Social Security benefits based on their spouse’s working record. But you may lose access to those benefits if you remarry. A widow or widower who remarries before the age of 60 won’t be able to claim on their former spouse’s record. In addition, anyone who is receiving benefits under their divorced spouse’s record will lose those if they remarry.
Next: The future of disability benefits
9. Trump makes good on his promise to cut disability benefits
Most politicians are reluctant to even raise the possibility of cutting Social Security retirement benefits. But some, including President Donald Trump, have floated the idea of slashing Social Security disability payments.
When the current administration unveiled its proposed budget in July 2017, it included $72 billion in cuts to payments to disabled workers, noted MarketWatch. To generate those savings, the government might tighten eligibility standards and cut retroactive benefits. The change is by no means a done deal, but if it happens nearly 1 million disabled workers could find themselves without a check they used to rely on to get by.
Next: The shrinking Social Security Trust Fund
10. Social Security runs out of money
The Social Security Trust Fund is running out of money. As things stand right now, Social Security’s reserve funds will run dry by 2034. At that point, there will only be enough money coming in from current workers to pay beneficiaries 79% of their promised benefits.
Right now, it’s unclear how exactly Social Security would handle that problem. It’s possible people already receiving Social Security would see their benefits cut. Or benefit reductions might only apply to people who retired after that date. The government might also raise the retirement age in an attempt to shore up the program or increase taxes to bring in more revenue.
Whatever happens, the shift could have a huge impact on Americans’ retirement security. While younger workers are less likely than older ones to say they expect to rely on Social Security in retirement, according a Gallup poll, non-retirees might be underestimating their need for their program. “If the Social Security system isn’t fixed, many of today’s workers may be in for a shock,” noted Gallup.