Social Security serves as the primary source of income for senior citizens that have reached retirement age. According to the Social Security Administration, half of all elderly married couples and 71% of elderly singles utilize Social Security as their dominant source of income. This is due to the fact that the benefits are protected against inflation and continue for the remainder of a retiree’s life.

Having worked 30 to 35 years, an individual relies on Social Security to help tide their final years. If any occurrence or factor were to severely reduce the monthly payout they expect, their standard of living would be drastically impacted.

More than a quarter of retiree Americans are complaining about their monthly benefits being lower than expected. Their lack of knowledge in regards to Social Security and how monthly payouts are calculated results in them being caught blindsided when they receive a lowered amount.

Here, we list down the reasons that could potentially contribute to a decrease in your Social Security benefits.

Outstanding Debt

An offset; a circumstance when an individual you owe money to proclaims your benefits, could result in a decrease in payout. There are multiple types of debts that could result in an offset these include back taxes, child support payments, and unpaid student loans.

If you are found to be responsible for the debt, then the Social Security administration reduces your monthly benefits by a specific amount until full repayment occurs. According to regulations the first $750 of your benefits is protected, and you will receive that full amount before the repayment term starts.

In scenarios where there are outstanding back taxes or student loans, the government can withhold up to 15% of your monthly check while the unpaid child support figure jumps to 65%.

A great number of retirees in America find their payouts marginalized as a result of outstanding debts. The seriousness of this issue is reflected in the net collection of more than $700 million in offsets in 2016.

Furthermore, any social security beneficiaries who continue to work and haven’t yet reached full retirement age are subject to an offset.  According to regulations in 2019, benefits will decrease by one dollar for every two earned over the amount of $17,640. This practice continues until the full amount is satisfied or an individual reaches their retirement age.

Early Retirement & Earnings

Many hopefuls rely on their Social Security statements in order to estimate their likely monthly paychecks. The common misconception is that if the payout stated is $1500 at the age of 62, the estimate assumes the individual has worked until that age and many individuals are caught unaware. In case you take early retirement your actual benefits will not reflect what was originally stated.

Furthermore, the benefits are calculated based on the highest earnings over a 35 year period of work. The 35 highest annual amounts are adjusted for inflation, and the monthly payout figure is generated.

Individuals with less than the required work history face lowered monthly payouts, for instance, every year of unemployment adds a zero towards the average. Additionally, any pay cuts or low-paying jobs also bring down your average.

To counteract any missed work years individuals are advised to work till at least the age of 70 to complete the required 35 years. (But what if you don’t want to work that long?)

Medicare Premiums

Another factor that lowers monthly payouts is Medicare premiums, which are deducted from your Social Security account.

In 2019, the monthly premium for Medicare Part B has been set at $135.50, for most individuals, this isn’t a worrisome figure. Furthermore, the harmless rule prevents your social security from decreasing due to increasing Part B costs.

However, this rule doesn’t cover retirees that earned more than $85,000 a year. Those individuals fall into a higher tax-bracket and are subject to Medicare surcharges with premiums in excess of $400.  This is an exorbitant sum that will severely reduce your paychecks.

Government Pensions

Pensions for local, state or federal government work (for which social security taxes were paid) can be subject to substantial reductions in benefits for dependents.

Spouses that receive payouts on behalf of their partners will find their benefits reduced by two-thirds of the primary recipient’s pension. For example, if you receive $600/month as a government pension, two-thirds of that amount ($400) will be subtracted from the benefit your spouse can claim.

As an individual approaching retirement you must be aware of all the factors that contribute to reduced monthly paychecks if you’re exclusively relying on Social Security to fund your living.

You can see why we created a Social Security Analysis (link  to help you navigate this whole process.  With our analysis, you’re guaranteed to save $5,000 or your money back.  So no risk really.

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