1 Did you change your withholding amount?
You can choose to have 0%, 7%, 10%, 12%, or 22% of your Social Security check withheld for federal income-tax purposes. Your withholding amount directly affects the size of your payment—the more money withheld, the smaller your monthly check.
Let’s assume your monthly Social Security payment is $1,000, and you’re having 7% withheld for taxes. You’d receive $930 every month ($1,000 x 0.07 = $70; $1,000 – $70 = $930).
If you increased your withholding to 12%, your monthly check would decrease to $880 and $120 would be withheld for taxes ($1,000 x 0.12 = $120; $1,000 – $120 = $880). Please keep in mind that these examples are for illustrative purposes only. Figures are based on assumptions as set out, and individual circumstances may vary.
Additionally, any change to your withholding could potentially cancel out the COLA. For example, changing from 12% to 22% in 2022 would bump your withholding up 10%, which is significantly more than the COLA for this year.
Not sure how much money you’re having withheld? You can check your most recent Social Security statement or your Social Security account on ssa.gov. You may also want to work with a financial professional to help you determine the appropriate withholding amount for your circumstances.
2 Are you still working?
Many people claim Social Security benefits but continue to work either for enjoyment or out of financial necessity. Depending on your age, your compensation could lower your Social Security payments.
- If you’re younger than full retirement age, as defined by the Social Security Administration (SSA), your benefits will be reduced by $1 for every $2 you earn above $19,560 (2022 limit). For example, let’s assume you’re 64 years old and earned $22,000 from your part-time job─$2,440 over the limit. The SSA would deduct $1,220 from your benefits this year.
- In the year you reach full retirement age, your benefits will be reduced by $1 for every $3 you earn above $51,960 (2022 limit).
- Once you reach full retirement age, your compensation has no effect on your Social Security payments. You can earn as much as you want from your job.
3 Did you sign up for Medicare or make changes to your coverage?
You’re eligible to receive Medicare starting at age 65, and the premiums for Medicare Part B are automatically deducted from your Social Security checks. If you added Medicare Parts C or D, you can also have these premiums deducted instead of paying the insurance providers directly. The upside of these automatic deductions is convenience. The downside is smaller Social Security payments.
Additionally, Medicare premiums aren’t fixed. When premiums increase, so does the amount that’s deducted from your monthly checks. This year, Medicare Part B premiums increased 14.55%, which equates to $21.60 per month for the standard premium—the largest dollar increase in Medicare history.
Another possibility is that the SSA considers you a higher-income beneficiary, which means you have to pay more than the standard premium for Medicare Part B. To make this determination, the SSA looks at your modified adjusted gross income (income plus tax-exempt interest income) from your most recent federal tax return. So, for 2022, the SSA would look at the tax return you filed in 2021 for the 2020 tax year.
You’re considered a higher-income beneficiary if your modified adjusted gross income was $91,000 or more ($182,000 for married couples filing jointly). As a result, you’ll pay a higher premium for Medicare Part B, which will lower your Social Security check. If you’re married, you may want to run the numbers to see if filing your taxes separately could help you avoid being a higher-income beneficiary. A financial or tax professional can help you with these calculations.
4 Do you owe student loans, back taxes, or child support?
Your Social Security benefits are generally protected from the claims of private creditors such as credit card companies; however, the government can garnish your monthly payment for other types of debt past due, including:
- Federal student loans
- Child support
- Federal taxes
The good news is that the government can’t take your entire benefit; for example, it can only garnish 15% of your monthly Social Security check to cover outstanding federal student loans.
If you find yourself in this situation, you may want to contact the appropriate government agency or an attorney to help you understand your options.
Making the most of your Social Security benefits
You may depend on your Social Security checks to help meet your living expenses, or you may use the money to supplement your savings. Either way, it’s important to understand how the annual COLA and your personal circumstances can affect the size of your monthly payments. Armed with this information, you can adjust your budget and goals accordingly to keep your financial life moving forward.
1 "2022 Social Security Changes Fact Sheet," Social Security Administration, October 2021.
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