Navigating the Benefits Cliff: When Earning More Can Mean Taking Home Less
Imagine working hard, getting a raise, or picking up extra hours, only to find out you're worse off financially. It sounds backward, but for many families, this is a reality known as the Benefits Cliff.
What Is the Benefits Cliff?
The Benefits Cliff happens when a small increase in income causes someone to lose essential public benefits, like childcare assistance, food support, or housing help. Instead of being rewarded for working more, people can end up with less money in their pockets.
This cliff isn’t just a policy issue; it’s a personal one. It affects real decisions about work, family, and financial stability.
Who’s Affected?
It’s not just those in deep poverty. The cliff can impact:
• Parents using childcare vouchers
• Families receiving housing support
• Individuals on healthcare subsidies
• Workers relying on SNAP (food assistance)
Even a modest benefit can make a big difference. Losing it can create stress and force tough choices.
Why It Matters
The cliff can:
• Discourage promotions or overtime
• Prevent saving for long-term goals
• Cause burnout and financial instability
It’s a hidden barrier that keeps people from moving forward.
Strategies to Navigate the Cliff
There are ways to prepare:
• Budget for “what-if” scenarios
• Use tools like the Federal Reserve’s Benefits Cliff Calculator
• Build a savings buffer
Before making any work-related decisions, talk to your HR team or if your company is a participating Financial Wellness at Work site, talk to you Financial Wellness Coordinator. They can help you understand how changes in income might affect your benefits—and guide you in making choices that support your financial well-being.