A lot of retired people look forward to their Social Security checks every year, hoping that they will give them enough money to keep up with inflation. This yearly raise, called the cost of living adjustment (COLA), helps them keep their buying power. Benefits never go down when the cost of living goes down, but checks can still go down in some cases. There are five ways this could happen.
Federal Taxes
Social Security payments can be cut by federal taxes. The Internal Revenue Service (IRS) can take your Social Security payments to pay off any federal taxes you owe. The law says that these levies can take up to 15% of each payment until the bill is paid off. You can also choose to have some of your benefits taken away to pay off your federal tax bills.
Overpayment Compensation
Your monthly benefit can also go down if the Social Security Administration (SSA) or another government agency gives you too much money. This decrease, which is called an administrative adjustment, helps get back money that was overpaid. This happens a lot when people get too much Supplemental Security Income (SSI). As soon as you stop getting SSI, the SSA can take these extra amounts out of your Social Security benefits or federal income tax returns.
Garnishment for Debts
Creditors may sometimes be able to take your Social Security retirement payments. This usually happens if you don’t pay back your federal student loans or if you owe child support, alimony, or court-ordered repayment to a victim. Private student loan lenders, on the other hand, can’t take these perks away. Also, it’s important to know that SSI payments can’t be taken away.
Medicare Part B Premiums
If you are a participant in the program, your Medicare Part B premiums will be taken out of your Social Security payments immediately. Your monthly perks may go down if your premiums go up. In most cases, this isn’t a big deal, but it can be when the COLA is zero, like it was in 2009, 2010, and 2015. In this case, the rise in Medicare premiums could cause your net Social Security income to go down.
Inaction on Social Security
Not taking any action by lawmakers would be the biggest reason why Social Security payments could go down. What the Congressional Budget Office says will happen is that the Social Security trust funds will run out in 2033. If this happens, beginning in 2034, benefits would be cut by 25%. This would be paid for by payroll taxes that are already being paid. Congress and the President can do things to stop this, but some of those things could mean that some benefit users get less money.
For retirees, it’s important to know what can lower their Social Security payments. Even though COLA makes sure that benefits don’t go down with inflation, other things, like federal taxes, overpayments, garnishments, Medicare fees, and lawmakers who don’t do anything can still change your monthly checks. The best way to manage and protect your Social Security benefits is to stay educated and take action.
FAQs
Can federal taxes reduce my Social Security benefits?
Yes, the IRS can levy up to 15% for unpaid taxes.
What happens if I receive an overpayment?
The SSA will deduct the overpaid amount from future benefits.
Can my benefits be garnished for debts?
Yes, for federal loans, alimony, child support, and victim restitution.
How do Medicare Part B premiums affect my benefits?
They are deducted from your benefits, which can reduce your net payment.
Will Social Security benefits be cut in the future?
Possibly, if no legislative action is taken, benefits could be cut by 25% in 2034.