3 Reasons You Could End Up With Less Social Security Income Than Expected

If you'll be relying on Social Security as a retiree, it's important to have an accurate idea of how much income your benefits will provide. Unfortunately, some seniors aren't correct about the amount of money they'll end up with, and thus many people overestimate the role Social Security can play in supporting them.

You don't want to end up getting less than you anticipated and having a financial shortfall, so be aware of these three possible reasons that you could end up with payments that are below the amount you expect to get.

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1. Benefits could shrink if you must file early

One of the biggest reasons your benefits could be smaller than you're planning for is if you have to claim them early.

You can start Social Security at 62, but each year you wait until age 70 will raise the amount of your monthly payment. Many people want to delay their benefits claim in order to take advantage of the income boost, but they sometimes end up unable to do so because they must stop working sooner than planned and need Social Security to help them make ends meet.

If you find yourself forced into an early benefits claim because of health issues, job loss, or other factors that necessitate a departure from your job sooner than expected, this could shrink your monthly Social Security payment by hundreds of dollars.

2. Medicare premiums are taken out of your monthly payment

Once you claim your benefits, you might be surprised by the size of your payment for another reason: Medicare premiums are typically taken out of your Social Security check.

These premiums buy important coverage, but they cost around $170 per month in 2022, and that price increases in most years. Since your Social Security benefit isn't huge in the first place, losing $170 or more of it to Medicare costs can make a big impact.

3. Working could cut your benefits

Lastly, if you have not yet reached your full retirement age (FRA) — which is between 66 and four months and 67 — you could inadvertently shrink benefit checks or cause entire payments to disappear if you get a job to supplement Social Security.

If you work before reaching full retirement age in 2022, you end up losing $1 in benefits for each $2 earned above $19,560 if you are under FRA the whole year. If you will hit your FRA sometime during the year but work before it, you lose $1 in benefits for each $3 earned above $51,960.

Eventually, the Social Security Administration accounts for the benefits withheld because of your excess earnings, and your monthly payment amount gets recalculated at full retirement age. So over time you reclaim the forfeited benefits. But in the interim, your annual Social Security income could be smaller than expected and may not supplement your earnings as much as you had hoped.

Being aware of a potentially smaller-than-expected benefit can help you make more-precise retirement plans.

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