Most retirees live on fixed incomes, usually through a combination of Social Security payments and retirement account withdrawals. This puts a premium on sticking to a monthly budget to ensure your income can cover all the bills.
That becomes a challenge when your Social Security payment is lower than normal — something that can happen more often than you might expect. As the AARP noted in a recent blog post, there’s a difference between your Social Security benefit and your actual payment. The benefit is the amount you are eligible to receive each month, while your payment is the amount that hits your bank account.
Payments can be reduced for a number of reasons. As GOBankingRates recently reported, your payment might move lower if you still work and your work earnings pushed you above a certain income limit. Your payment might also be lower if creditors garnished part of it because you owe back income taxes or defaulted on student loans (or unpaid alimony or child support).
Here are some other reasons you might see a lower Social Security payment from time to time, according to AARP:
- Medicare: If you already collect Social Security and then enroll in Medicare at age 65, the premiums for Part B are automatically deducted from your monthly Social Security payment. In addition, those who have Medicare Advantage or Part D plans can choose to pay those premiums directly out of their Social Security benefits.
- Federal income tax: Social Security beneficiaries with annual incomes above $25,000 for a single filer and $32,000 for a couple must pay federal income tax on anywhere from 50% to 85% of their Social Security income. You can choose to have the taxes withheld from your monthly benefit payment if you don’t want to pay them all at tax time.
- Government pension: Your Social Security payment might be reduced if you have a pension and are covered by the Windfall Elimination Provision, which can reduce retirement or disability benefits if you collect a pension from a job in which you did not pay Social Security taxes. This mainly applies to retirees who worked for state or local government agencies that are not covered by Social Security, including many teachers, firefighters and police officers.
- Benefit overpayment: If the SSA found that previous benefit payments were higher than they should have been, the overpayment amount might be withheld from future payments. This often occurs if you also qualify for Supplemental Security Income (SSI).
- Family maximum: You might see a reduction in spousal and survivor benefits due to the family maximum benefit, which caps how much a family can collectively receive from Social Security on the basis of one member’s earnings record.
- Workers’ compensation: Social Security beneficiaries who also receive both Social Security Disability Insurance (SSDI) and workers’ compensation can apply an “offset” that might reduce their disability benefit. The combined total of workers’ comp and SSDI payments can’t amount to more than 80% of what the SSA determines to have been your average earnings before you became disabled. If they do, one or the other benefit will be reduced to get under the cap.
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