Return on Retirement

7 surprises that shrink your Social Security check

When Social Security payments form the backbone of your monthly budget — as they do for many retirees — it would be nice to accurately anticipate how much you'll get.

Unfortunately, that's just not the case. In a survey released Thursday from Nationwide Retirement Institute, 29 percent of retirees say their benefit ended up being less or much less than expected.

Consumers who had been retired for 10 years or more were more likely to say their benefit was lower than expected. The survey was conducted in February. Results were from 909 adults age 50 or older, roughly two-thirds retired.

Current workers seem to be setting themselves up for a similar upset. A quarter of the survey respondents yet to retire aren't sure how much their benefit will be. Those preretirees expect to get an average monthly Social Security benefit of $1,610, which is $232 more than the mean recent retirees reported actually receiving.

"They're just guessing what they're going to receive," said Dave Giertz, president of sales and distribution for Nationwide.

Here's why your benefit might be smaller than expected:


Until you actually apply for Social Security, anticipated benefits are just estimates, according to the Social Security Administration. But that doesn't mean you can't make a more educated guess.

Using an online calculator or talking with a financial advisor can help you better determine your benefit and claiming strategies, Giertz said. The government also offers estimated benefits and earnings tracking for consumers who sign up for a "My Social Security" account.

Bad records

It's possible that your Social Security earnings record isn't correct, said certified financial planner Janet A. Stanzak, principal at Financial Empowerment in Bloomington, Minnesota. Because your Social Security benefit is based on your work record, any error of misreported or missing earnings could result in you receiving less.

"Keep a record of your earnings throughout your work career so you have something you can look back on," she said. Monitor your Social Security statement to make sure your work record and earnings are accurate, and hang on to proof — ideally tax returns or W2s — that could be used to amend any errors.

Early claiming

Among Nationwide's survey respondents, recent retirees began collecting Social Security at a mean age of 62. "There seems to be a theme," said Giertz.

While claiming early can be a smart financial decision in certain situations — whether you're in poor health, have underage kids that could boost your payout or just need the cash — doing so does reduce your monthly benefit. (That's why advisors generally suggest waiting as long as possible to file.)

Depending on your full retirement age and how early you claim, the reduction could shave off as much as 30 percent.

Work offset

"If you're working, you absolutely should think long and hard before you take Social Security," said certified financial planner Clark Randall, founder of Financial Enlightenment in Dallas. "It's very punitive if you're making any money at all."

In 2016, a retiree younger than full retirement age would see his Social Security benefit reduced by $1 for every $2 he earns above $15,720. In the year you reach full retirement age, benefits are reduced by $1 for every $3 earned above the limit of $41,880.

This dip is temporary, at least. From the month you reach full retirement age, there are no benefit reductions for working, Clark said.

Medicare premiums

"Medicare premiums [for parts B and D] are the most consistently withheld payments on Social Security," said Stanzak. That's not a surprise for most retirees, but what can be jarring is how much is withheld.

Part B premiums for 2016 run as little as $121.80 per month or as much as $389.80, depending on the modified adjusted gross income reported on your 2014 tax return. Moves like exercising stock options, doing a Roth IRA conversion or selling valuable real estate could trigger an unexpected jump in costs in a future year, she said.

"The best you can do is get it adjusted going forward," Stanzak said. Consumers can file an appeal noting that their high-income year was an aberration, or that other circumstances such as divorce have reduced your income.


Some pensions — including those for many government employees, teachers and railroad employees — don't pay into Social Security. Depending on the rest of your work record, certain provisions may kick in that reduce your benefit by up to 50 percent, or even completely wipe out spousal and survivor benefits.


If you're behind on debts, some of your monthly benefit may be up for grabs. The government can withhold a portion of Social Security benefits to pay certain debts including back taxes, delinquent federal student loans, alimony and child support, Randall said.

While it won't reduce the size of your check, per se, collectors of other debts may also be able to access some of your benefits once deposited into your bank account. Depending on how you receive the funds, banks may automatically protect two months' worth of benefits, he said.