Sneaky Reasons Your Social Security Check Is Lower Than Expected

Retirees across the United States eagerly await their Social Security check each month. The average monthly benefit came out to just under $2,000 in January 2024, and typical Social Security benefits serve to replace roughly 40% of a retirees pre-retirement salary. Considering that the typical retiree will need about 80% of their pre-retirement income to maintain their existing lifestyle, it's safe to say that Social Security benefits form a significant portion of most retirees' overall funding plans. Unfortunately, even though Social Security benefits are critically important for millions of older Americans, it's fairly easy to miscalculate the benefit amount you are set to receive. You might also see that benefit figure change from year to year as a result of external factors beyond the annual COLA rate, which typically increases benefit payout rates alongside inflation.

There are several important things to keep in mind when planning your exit from the workforce and initiating Social Security benefit payments. It's also important to understand the outside factors can influence how much you receive on a monthly basis. These sneaky changes tend to fly under the radar, leaving recipients blind to the possibility of diminishing their Social Security benefits. A check that's smaller than you expect can have an outsized impact on your finances, so keeping these things in check should be high on your list of priorities both as you prepare for retirement and while you enjoy it.

Most people will be aware that working while drawing Social Security benefits can temporarily diminish the value of the checks you receive from SSA. Unless you've aged out of income caps, workers who are also receiving benefits will see $1 taken off their check for every $2 they earned above the 2025 income limit of $23,400. However, this isn't the only way that your salary can influence your Social Security benefits in a negative way.

Social Security checks are calculated based on your 35 highest earning years of work. With that said, most full-time employees will reach eligibility for benefits after ten years in the workforce. You might not know it, but you can (and should) set up an account with the SSA to check on your progress toward this goal, and to explore estimates for what you can expect to earn in benefits once you do retire. What isn't obvious about this data is that the estimated benefit is built off of a model that assumes you'll continue earning at your current average rate. If a downturn in your earnings takes place, the existing estimate will not account for that change. Similarly, if you leave the workforce early, you may end up with one or more zeros added to years in your calculation — years that the model previously expected you to be working. This can result in monthly checks that are notably smaller than expected if you haven't recalculated your estimates with this new information.

High earners we'll see an increased Medicare Part B premium withheld from their Social Security checks. While the cost of living adjustment, and other legislation relating to Medicare, tends to keep this withholding fairly even from year to year, those with an income greater than $97,000 (as an individual, or $194,000 for joint filers), increased premiums can result in a larger amount withheld from your Social Security checks. This can diminish the net value of your checks from year to year by a small (or even large) margin.

Most people will see Medicare costs influence their Social Security payments through Medicare Part D. Part D plans cover prescription medication, and are based on annual income figures. They experience income-dependent monthly adjustments, and changes in the amount you draw down from non-tax advantaged sources will see this premium amount fluctuate on a fairly consistent basis. It's a good idea to plan your retirement asset drawdown strategy around minimizing tax liabilities more broadly, but it's also important to remember that changing your funding sources in a way that increases your adjusted gross income come tax time will also potentially result in a shift to your Medicare premiums. The result can diminish your Social Security check value. This change might not be substantial, but it can come as a surprise to those anticipating a stable retirement income source every month.

Most people know that claiming benefits early is an option. While full retirement age stands at 67 today, Social Security recipients can technically start drawing benefits at age 62. However, taking benefits early comes with a rate reduction. On the flip side, if you can wait until age 70 to start receiving benefits than you can enjoy a rate increase to your monthly benefits amount.

Even though it's fairly well known that these rate changes occur depending on when you choose to start taking benefits, mistakes in the calculation phase can still happen. Returning to your Social Security record, it's easy to use the report to get your estimated full retirement benefit amount. Focusing on this figure can act as a solid guidepost, but if you plan on starting your benefits before reaching full retirement age, you'll need to ensure that you make adjustment in your funding calculations rather than just relying on a previous figure. 

Fortunately, if you start taking benefits early and make the mistake of anticipating a full benefit amount rather than the rate reduction value, you can pause benefits or even reset the clock for a Social Security do-over at a later date. This little known rule can help boost your Social Security checks, so long as you make the change within one year of initiating your benefit payments, and return the money that was already paid out to you.