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3 Reasons You Could End Up With Less Social Security Income Than You Expected | Smart Change: Personal Finances

(Christy Biber)

If you’re relying on Social Security as a retiree, it’s important to have a clear idea of ​​how much income your benefits will provide. Unfortunately, some seniors aren’t right about how much money they will end up with, and as a result, many people overestimate the role Social Security can play in supporting them.

You don’t want to end up receiving less than expected and running into a financial shortfall, so be aware of these three possible reasons why you could end up with payments that are lower than the amount you hope to get.

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1. Benefits may decrease if you have to file sooner

One of the main reasons your benefits might be less than you expected is if you need to claim them sooner.

You can start Social Security at age 62, but each year you wait until age 70 will increase your monthly payment amount. Many people want to delay claiming benefits in order to take advantage of increased incomes, but sometimes they end up not being able to do so because they have to stop working earlier than expected and need social security to help them cope. make ends meet.

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If you find yourself forced to apply for early benefits due to health issues, job loss, or other factors that require you to leave your job earlier than expected, it could reduce your monthly security payment. social of hundreds of dollars.

2. Health insurance premiums are deducted from your monthly payment

Once you’ve claimed your benefits, you might be surprised at the amount of your payment for another reason: Medicare premiums are usually deducted from your Social Security check.

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

3. Working could reduce your benefits

Finally, if you have not yet reached full retirement age (FRA) – which is between 66 and four months and 67 – you could inadvertently reduce benefit checks or have entire payments 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 every $2 earned above $19,560 if you’re under FRA all year. If you collect your FRA during the year but work before then, you lose $1 in benefits for every $3 earned above $51,960.

Eventually, the Social Security Administration accrues the benefits withheld due to your excess earnings and your monthly payment amount is recalculated at full retirement age. So over time you regain lost benefits. But in the meantime, your annual Social Security income might be lower than expected and not supplement your income as much as you hoped.

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

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