An estimated 58.3 million Americans receive a Social Security check each month, according to the Social Security Administration (SSA). For some, it represents their primary source of retirement income.

If you're banking on Social Security to supplement what you've saved in a 401(k), IRA, or another qualified retirement plan, you may be in for a shock once your first payment arrives. If you recently started receiving Social Security benefits, here are three reasons why you may be getting less than you expected.

Key Takeaways

  • The amount of your Social Security check will decrease if you owe certain debts (called offsets), like back taxes or student loans.
  • An increase in your income also often decreases your Social Security benefits.
  • Taking your Social Security benefits early can reduce your payments by up to 30%.
  • A higher Medicare premium, trigged by higher income, can diminish your Social Security check.

An Offset Shrank Your Social Security Check

One potential scenario that could result in lower Social Security benefits is an offset. That's when someone to whom you owe money makes a claim against your benefits.

Examples of debts that could result in an offset include:

  • Defaulted student loans
  • Unpaid alimony or child support obligations
  • Back taxes 

You could also be subject to an offset if you're receiving Social Security benefits before you reach full retirement age and you continue to work.

SSA regulations protect the first $750 in the benefits you receive. However, if it's determined that the debt does indeed belong to you, the Social Security Administration will reduce your benefits each month by a certain amount until what you owe is repaid. Once an offset for debt is satisfied—or you reach your normal retirement age, if the decrease is due to early benefits—you'll receive your full benefit amount. Meanwhile, you have to deal with the temporary shortfall. 

Early Benefits Shrank Your Social Security Check

For most people, full retirement age (for Social Security purposes) is either 66 or 67, depending on the year they were born. But it's possible to begin taking your Social Security retirement benefits as early as 62. While that can give you some financial relief if you're strapped for cash, there's a trade-off: The size of your benefits automatically—and permanently—goes down.

A 2019 survey of 1,315 U.S. adults aged 50 or older by the Nationwide Retirement Institute (NRI), a subsidiary of the Nationwide Mutual Insurance Company, found that 25% of future retirees say they plan to apply for benefits early; 89% of recent retirees and 97% of older retirees (retired a decade or more) had started receiving benefits at age 62. In that same study, 24% of current retirees said their Social Security check was smaller than they anticipated.

How much can taking benefits early really cost you? Let's say your normal retirement age is 67, but you decide to apply for Social Security when you turn 62. Because you're taking benefits for an extra 60 months, your Social Security check would be reduced by 30%.

80%

The number of retirees polled by the Nationwide Retirement Institute who think they are eligible for benefits sooner than they actually are.

If you're entitled to $1,000 a month, you'd only get $700. That's a pretty significant chunk of money to give up, and that check will be lower for life. If you're thinking of getting benefits early, it pays to crunch the numbers to see how much you stand to lose by doing so.

Medicare Premiums Shrank Your Social Security Check

Seniors are eligible to enroll in Medicare in the year they turn 65. If you sign up for Medicare Part B, your premiums are deducted from your Social Security benefits. For 2019, the standard monthly premium is set at $135.50. However, it's entirely possible that you could end up paying more if you fall into a higher tax bracket.

For certain high-income earners, Medicare premiums are equivalent to 30%, 50%, 65%, or even 80% of the total cost of coverage.

If you file an individual return, for example, and your income is higher than $85,000 but less than $107,000, you will pay $189.60; if it's between $107,000 and $133,500, you pay $270.90; if it's above $160,000 but less than $214,000, you pay $433.40. You can see all the rates on the Medicare website, cms.gov.

"Most retirees have [the minimum] Medicare Part B premiums of $134 per month deducted from their Social Security check. However, some high-income retirees are shocked to find that their premiums can be as high as $460.50 per month," says James B. Twining, CFP, CEO of Financial Plan, Inc., Bellingham, Wash. "If your income has recently dropped, you may appeal to the SSA for a lower premium. The IRS may be providing the SSA with older data that needs to be updated."

Other Factors Affecting Your Social Security Check

If you expect your income to go up instead of down in retirement for any reason—you sell off a high-value asset, you start a profitable business, you earn a lot as a consultant or freelancer—that could substantially impact what you get from Social Security. Your benefits could dwindle even further if you have Medicare Parts A and B and you're also paying a separate premium for a supplemental policy, called a Medigap plan.

The Bottom Line

Relying on Social Security to see you through retirement can put you on thin ice financially. It becomes even trickier when you're getting less money than you'd budgeted to receive. Taking the time to clear up any outstanding debts, weigh the cost of taking benefits early and look at how your income stands to affect your benefits can help you avoid any surprises once your Social Security checks start rolling in.