Almost 90 percent of Americans age 65 and older receive Social Security benefits, and the Social Security Administration expects about 63 million people to collect in 2018 — that's about $1 trillion in Social Security disability benefits, Social Security retirement benefits and Social Security benefits for children and other survivors. But benefits can change from year to year, and not always for the better.
Existing rules and new rules going into effect in 2018 can affect your Social Security benefits status and reduce the amount you can collect. Understanding the reasons you might get less of these funds can help you avoid Social Security mistakes that could reduce your benefits unnecessarily. Here are 10 reasons you could get less Social Security:
1. The Full Retirement Age Is Going Up
The full retirement age — the age at which you can collect full retirement benefits — increases to 67 years old for individuals born in 1960 or later. The full retirement age is now 66 years and four months for individuals born in 1956, and it increases by two months each year. There's no change in the full retirement age of 66 for individuals born in or before 1954.
2. You Delay Applying for Benefits
With so many options regarding when to file for Social Security retirement benefits or Supplemental Security Income, it can be quite confusing — and not having a clear understanding of your options can affect your benefits. For example, you can apply for retroactive benefits if you don't apply for Social Security as soon as you're eligible to, but Social Security won't pay for more than six months in the past. And failing to submit your Medicare application three months before retirement can result in late fees and delayed Medicare coverage. It's important to know the smartest time to take your benefits.
Workers who need help figuring out when to apply for Social Security retirement benefits can call the Social Security Administration at 800-772-1213, which is also the SSI phone number you can use for SSI eligibility questions. Alternatively, visit your local Social Security office. The office can also answer any questions you might have, like how to get a Medicare application and how to apply for SSI.
3. Medicare Premium Increases Offset Your Cost of Living Increase
For about 70 percent of Medicare enrollees, Medicare premium increases must be lower than increases in the enrollees' Social Security benefits, and as a result, many enrollees pay a reduced Medicare premium. The Centers for Medicare & Medicaid Services expects 42 percent of these individuals to pay the full premium beginning in 2018, due to a cost-of-living increase in Social Security benefits. This increases those individuals' Medicare premiums from an average of $109 to the full $134, thereby offsetting — and in some cases cancelling out — their cost of living increases.
Learn More: Things to Expect From Social Security in 2018
4. You Divorce Too Soon
You can collect spousal Social Security benefits even if you're divorced if you were married for at least 10 years. Meeting that requirement entitles you to half of your ex's full-retirement-age benefit — or the full widow or widower benefit if your ex dies — which can come in handy if your ex was the primary earner in your household. In the event you're eligible on your own but for a lesser amount, you'll get your benefit first, and the SSA will make up the rest by paying on your ex's record.
This means it might be in your best interest to stay legally married until you reach the 10-year mark. But don't worry — you don't have live with your spouse the whole time. And once you've been divorced for two years and are at least 62 years old, you can collect on your ex's record even if he or she hasn't applied yet.
5. You’re Widowed and You Remarry Before Age 60
Divorced workers can only collect Social Security benefits on their ex-spouse's record if they stay single. But widows or widowers can remarry after they reach age 60 — or 50 if they're disabled — with no effect on their survivor benefit eligibility.
6. You Start Collecting Social Security Too Early
Claiming your Social Security retirement benefit before you've reached the full retirement age — which ranges from 65 to 67, depending on your birth year — can permanently reduce your benefit amount. Assuming your full retirement age is 67, you'll reduce your full-retirement-age benefit by 30 percent if you start collecting at age 62. Alternatively, delaying retirement increases your annual benefit by as much as 8 percent, but there's no increase for waiting beyond age 70.
Consider talking to a financial advisor before you take steps toward claiming your benefits early.
7. You Ignore Your Social Security Benefits Statement
Your Social Security Benefits Statement is an important financial planning tool. In addition to showing how much you'll receive at different retirement ages, the statement gives you useful information about SSI — specifically, how much SSI you'll get if you become disabled — and survivor benefits for your family in the event you die. This information can help you plan for retirement and maximize your benefits.
8. You Have Additional Income
Individuals who collect Social Security might have to pay taxes on up to 85 percent of it if the individuals earn taxable income from another source, such as a job or investment dividends. You'll pay tax on as much as half of your Social Security benefit if your total income falls between $25,000 and $34,000. You'll pay tax on the full 85 percent with more than $34,000 in income. A married couple filing a joint return will pay tax on 50 percent of their benefits with combined income of $32,000 to $44,000, and they'll pay tax on 85 percent with income of more than $44,000.
Earning money can also reduce your benefits. In 2018, workers will lose $1 in benefits for each $2 they earn above $17,040, but only until they reach full retirement age. On the other hand, it's possible that your earnings will eventually increase your Social Security benefit, and even if it doesn't, the money you earn could give your retirement savings a boost.
9. Government Cuts to Social Security Occur
Social Security, Medicare and Medicaid account for a large portion of federal spending. Although President Trump announced plans to keep these entitlements in place, that could change. Florida Senator Marco Rubio, for one, supports cuts in Social Security and Medicare to help pay for the Republican tax plan, Newsweek reported.
10. Funding Runs Out
The Social Security trust fund could run out by 2035, according the Social Security Administration Office of Retirement and Disability Policy. Keeping Social Security solvent for the next 75 years would involve raising the Social Security payroll tax rate from 12.4 percent to 14.4 percent, cutting benefits by 13 percent, or enacting some combination of the two, according to the office's website.
Should Social Security funding run out, there's nothing you can do. But you can start saving for your retirement now, just in case.