In Social Security parlance, “benefit” and “payment” are often used interchangeably, but they do not mean precisely the same thing.
Your benefit is the amount the Social Security Administration (SSA) calculates you are eligible to receive each month, based on your earnings history, claiming age and the type of benefit you get. Your payment is the amount of money that pings monthly into your bank account.
There can be a considerable difference between the two, based on such factors as employment or Medicare status. Here are eight things that could cause dollars to be deducted from your benefit.
If you are collecting Social Security and enrolled in Medicare, premiums for Part B, the part of Medicare that covers doctor visits and other outpatient treatment, are automatically deducted from your monthly benefit payment.
Most people pay the “standard” Part B premium ($164.90 a month in 2023, going up to $174.70 in 2024). Beneficiaries with higher incomes (over $103,000 a year for an individual taxpayer and $206,000 for a married couple filing jointly) are charged up to several hundred dollars a month more for Part B.
People who pay the standard rate are covered by “hold harmless,” a provision of Social Security law that prevents a beneficiary’s monthly payment from going down year to year due to an increase in Part B premiums. The provision does not apply to those paying the higher premium rates or to anyone in their first year of Medicare coverage.
Those who have Medicare Part C (Medicare Advantage) or Part D (prescription drug) plans may choose to pay those premiums directly out of their Social Security. Talk to your plan provider about billing options.
If you claim Social Security before your full retirement age, or FRA (currently between 66 and 67, depending on your year of birth), and continue to work, you are subject to the SSA’s “earnings test.” In the years before you reach your FRA, $1 is temporarily withheld from your benefit payment for every $2 you earn above an annually set cap.
In 2024, that cap is $22,320. Suppose you earn $30,000 from a part-time job. The difference between that and the earnings limit is $7,680, so $3,840 — half that amount — would be deducted from your benefits for the year.
In the calendar year you will reach FRA, the limit goes up (to $59,520 in 2024) and withholding goes down, to $1 for every $3 in earnings above the cap.
When you reach full retirement age, the earnings test ends and there is no withholding, no matter how much you earn. In addition, the SSA recalculates your benefit to a higher amount so that over time you are, in effect, repaid for the pre-FRA withholding.