Personal Finance

How the timing of your Social Security check impacts your financial health

Key Points
  • New research finds that the more time between your Social Security checks and your billing due dates, the more likely you are to have a financial shortfall.
  • Longer months, which will naturally extend the time between checks about four times a year, can also contribute to money shortages.
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Your financial wellness could hinge on the timing of your Social Security check every month, according to new research.

For 28 million beneficiaries, Social Security checks are issued on the second, third or fourth Wednesday of every month according to birth date. Other beneficiaries get their checks at other times of the month.

The timing of those checks and how they correspond to the due dates for your bills can make a big difference whether you are cash rich or cash strapped, research from the University of Nebraska-Lincoln and the University of Illinois at Urbana-Champaign found.

For every one week increase in the timing between when the money comes in and when bills are due, there is an 18 percent increase in the likelihood you will come up short, the research found.

A one-week discrepancy in timing between checks and bills also leads to 42 percent more bounced checks, 37 percent more online payday loans and 13 percent more overdrafts.

"If you have these big recurring bills due right when you get your check, there's going to be less opportunity to squander your cash," said Brian Baugh, assistant professor of finance at the University of Nebraska-Lincoln, and a co-author of the research.

Your social security check could be less than you expect
Your social security check could be less than you expect

Many retirees rely on their Social Security for most, if not all, of their retirement money. A recent survey from Nationwide Retirement Institute found that 55 percent of individuals expect their benefits to be their main source of income in retirement.

While you don't have the ability to change the dates when your checks are disbursed by the Social Security Administration, you can change your bills to correspond to those dates.

That may not always be possible to do for some big ticket items like mortgage or car payments, but it is possible for credit cards, Baugh said.

Another factor that can contribute to a shortfall is whether a pay cycle is 28 days or 35 days due to longer months. This typically occurs four months per year.

Money shortages are 9 percent higher per day during those longer pay periods, the research found.

People shouldn't live at their very financial limits.
Brian Baugh
research co-author

You should look at the calendar and plan for longer months when there will be more time between payments, Baugh said.

"If a household has a couple of thousand dollars just in emergency funds, this would more than cover this variation in timing across different months," Baugh said.

Many households have nowhere to go because they have already maxed out their credit cards and have limited resources for cash.

That makes borrowing through payday loans more prevalent, even for some high-income households, according to Baugh. Payday loans are short term, high interest rate loans.

"People shouldn't live at their very financial limits," Baugh said. "There's a lot more safety when you're not at the margin of purchase catastrophe."

The research tracked recurring bills including credit cards, mortgages and car payments for more than 30,000 households.

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