Social Security: 4 Ways You Can Lose Your Benefits
Social Security provides financial support to retirees, people with disabilities, and those with limited income. Many Americans depend on it for their daily expenses. However, not everyone knows that they can lose part or all of their Social Security benefits due to certain actions or situations. Understanding these risks is essential to making informed decisions about your benefits.
1. Claiming Social Security Too Early
The full retirement age for Social Security benefits is 67. If you claim your benefits before this age, you will receive a lower monthly payment for life. Here’s how it works:
- If you claim at 66 and 11 months, you get 99.4% of your full benefits.
- If you claim at 65, you get 86.7% of your full benefits.
- If you claim at 62, you receive only 70% of your full benefits.
Once you start collecting, your payments will not increase unless you withdraw your claim within one year and repay the benefits received.
2. Working Too Much While Collecting Benefits Early
If you start collecting Social Security before reaching full retirement age but continue to work, your benefits may be reduced. In 2024, the Social Security Administration (SSA) will withhold $1 for every $2 you earn above $22,320 if you are below full retirement age. Once you reach full retirement age, there are no earning limits, and you will receive your full benefits.
3. Going to Jail or Prison
If you are incarcerated for more than 30 days due to a criminal conviction, your Social Security benefits will be suspended. Payments can restart the month after your release, but you must notify the SSA. However, your spouse and dependents can still receive benefits if they qualify.
4. Paying Taxes on Social Security Benefits
Many people don’t realize that Social Security benefits can be taxed. If you earn above a certain amount, a portion of your benefits will be subject to federal and state taxes:
- Single filers: If your income is over $25,000, up to 85% of your benefits can be taxed.
- Married couples filing jointly: If your combined income is over $32,000, up to 85% of benefits may be taxed.
Twelve states also apply their own tax rules to Social Security benefits, so be sure to check local regulations.
Additional Ways You Could Lose SSDI Benefits
For those receiving Social Security Disability Insurance (SSDI), benefits may stop under certain conditions:
Returning to Work
SSDI is only for people who cannot work due to a disability. If you start earning above the Substantial Gainful Activity (SGA) limit ($1,470 per month in 2023 or $2,460 for blind individuals), your benefits may stop.
Reaching Full Retirement Age
When you reach full retirement age, your SSDI benefits will automatically convert into regular Social Security benefits. The payment amount usually remains the same.
Health Improvement
The SSA reviews SSDI cases periodically. If your condition improves and you are able to work, your benefits may stop. Reviews happen:
- Every 6-18 months if improvement is expected.
- Every 3 years if improvement is possible.
- Every 7 years if no improvement is expected.
Incarceration
Like regular Social Security benefits, SSDI benefits are suspended if you are jailed for over 30 days. If you are in jail for more than 12 months, your benefits are terminated, and you must reapply.
Conclusion
Social Security benefits are a critical source of income for millions of people. However, claiming too early, earning too much while collecting benefits, going to jail, or owing taxes can reduce or eliminate your payments. If you receive SSDI, returning to work or health improvements can also affect your benefits. Understanding these risks will help you make better financial decisions and avoid losing money you depend on.Social Security provides financial support to retirees, people with disabilities, and those with limited income. Many Americans depend on it for their daily expenses. However, not everyone knows that they can lose part or all of their Social Security benefits due to certain actions or situations. Understanding these risks is essential to making informed decisions about your benefits.
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