What’s Subtracting from My Benefits?

Image Via Nuthawut Sonsuk

So far, in 2022, we’ve seen record-high Cost-of-Living-Adjustments (COLA) raise Social Security benefits by 6 percent. Despite this significant increase, seniors may be seeing a smaller payment than they were expecting. That’s because there are factors other than age that can lower your benefits. The reasons for smaller benefits are varied; some can be avoided, while others may be trickier to work around. As a result, 2022 Social Security checks might start to feel lighter than we’d like.

The Reasons for Smaller Benefits

MarketWatch.com offers insight into some of the basic factors that can lower our benefits. The biggest contributing factor that lowers our benefits is age. Claiming our benefits too early reduces them by up to 30 percent.

But other factors can also lower our benefits without us knowing. Another considerable factor is the cost of Medicare. In 2022, Medicare costs are set to increase, and payment will be automatically withheld from our benefits each month. Healthcare is the most frequent cost to seniors, and Medicare Premiums can catch the unsuspecting senior off guard.

Other factors to be wary of are earnings and pension plans. Working and collecting benefits can be a good way to pack your retirement fund, but the balance can be delicate. For “half-retired,” seniors who are working, there’s an earning cap that can negatively effect your benefits. If your earning exceeds the capped limit, your benefits for that month will be reduced, and then that reduction will be factored back in, the following year.

Additionally, pensions that are exempt from Social Security taxes, like WEP or GPO pensions, may lower your retirement benefits. It’s based off the assumption that you can pull from these pensions or high earnings to offset any retirement expenses. Other, specific types of earnings can also affect your benefits.

The Social Security Trust

It can feel like a game of tug-of-war between us and the federal government. We do what we can to raise our benefits and they do what they can to lower them due to mismanagement of the Trust and a lack of options to pay for other vital resources. The Council for Retirement Security wants to strengthen the Social Security Trust, so that seniors and their benefits won’t have to be on the hook to pay for government expenses.  

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