Around 72 million Americans receive benefit checks from the Social Security Administration (SSA) on a monthly basis, and for many of these recipients, these checks are primary source of income that allows them to cover their living expenses such as housing or food. Social Security benefit checks roll out on the second, third, and fourth Wednesday of each month in relation to the date of birth of the recipient. As such, for July, the first round of benefit checks were just sent out on July 9th, and the remaining two will follow over the next two Wednesdays which are the 16th and the 23rd respectively.
Some Social Security beneficiaries are noticing that their checks for this month have decreased slightly, however, and there are several reasons as to why this could have occurred. Here is what you need to know.
Millions of Social Security beneficiaries notice their checks getting smaller
According to the Social Security Administration (SSA), these reductions that seem to have come without warning are merely a part of routine benefits administration. However, even the slightest of change can have a major impact on the financial stability of the beneficiary. As such, the reason for the reduction will vary from recipient to recipient since benefits can be reduced due to a number of factors.
The main driving forces behind a benefit reduction include Medicare premium payments, taxes, overpayment balances, or a change in income that resulted in the beneficiary exceeding an income threshold. In the case of Medicare premiums, the amount that is contributed towards the Medicare program is usually taken out of the benefit amount automatically. Beneficiaries on Medicare may be noticing even more of a reduction to their check this month because Medicare premium rates have recently increased. Medicare Part B or D recently underwent an increase and as a result, beneficiaries who contribute to this will notice that their net benefit amount has been reduced slightly.
For Social Security recipients who have opted to withhold federal taxes from their benefits, their monthly net benefit amount could also undergo a reduction in the case of tax rate or filing status changes.
Individuals who are beneficiaries of Social Security but also have other employment or income could also see some changes and reductions to their benefit amounts if they exceed certain income thresholds. As such, these individuals could also be subject to a Retirement Earnings Test.
SSA begins clawbacks on overpayments
Another significant reason behind your benefit reduction could be the 50% withholding rate that has gone into effect for Social Security beneficiaries who were found to have been overpaid in the past. The Trump Administration initially announced the withholding rate to be 100% of the benefit until the balance is cleared, however, this announcement was met with harsh criticism from advocates and beneficiaries.
Subsequently, in an emergency meeting held at the SSA in April, the withholding rate was dropped to 50% and notices informing beneficiaries with overpayment balances of the situation were sent out on April 25. Upon receiving the overpayment notice, beneficiaries then had a 90 day period to either submit a waiver of repayment if they felt that they had not been overpaid and losing half of their benefit would cause severe financial strain. Alternatively, the recipient could submit a request to negotiate a lower rate of withholding. The beneficiary should also consider setting up a repayment plan so as to avoid losing such a significant fraction of their monthly income.
This 90 day period will reach a close towards the end of July, and if the recipient had not taken any action after receiving the notice of overpayment, the SSA will automatically begin withholding 50% of their monthly benefit check until their overpayment balance is cleared.