Oct 11, 2024
More than 70 million people received Social Security benefits in 2022, and as of this past August, the average monthly benefit among retired workers was $1,920.48.
If you’re retired or close to it, you may depend on Social Security to cover your ongoing expenses. What you may not realize is that specific actions on your part could result in lost benefits.
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The good news is that, in some cases, you can take steps to prevent this situation from happening. Regardless, here are some lesser-known reasons your Social Security benefits could be lost.
1. Not paying your taxes
If you're earning income and don't pay your taxes, the IRS can garnish a portion of your wages to recoup the money that's owed. This is also the case for retirees who don’t pay their taxes. While they may not be able to garnish your wages if you’re not working, the IRS can withhold a portion of your monthly Social Security benefits under the Federal Payment Levy Program.
They won't take your entire benefit, but they can garnish up to 15% of each monthly payment you're entitled to until your tax debt is fully paid.
You can avoid this situation by contacting the IRS and creating an installment plan to pay your taxes. If you keep up with your payments under one of these plans, you'll be considered current on your tax debt, which means you’ll be closer to collecting your full Social Security payments.
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2. Not making federal student loan payments
Just as falling behind on tax obligations could result in losing some Social Security benefits, so too can failing to repay federal student loans. In this situation as well, you risk having up to 15% of your monthly benefits garnished.
If you’re struggling to keep up with your student loan payments, you can see if you’re eligible for forbearance or deferment as a temporary solution. Consolidating your loans may also be a possibility. But in many cases, you’ll find that the interest you’re paying on federal student loans is a better deal than the interest rate a private lender will give you on a refinance.
If you’re considering helping a child or grandchild pay for college, it’s best not to go into debt if you don’t have a repayment plan. You’re better off saving through a 529 plan than committing to loan payments you might struggle to make on a fixed income.
3. Being in prison
While most people wouldn’t choose to be incarcerated, if you end up in prison, you’re getting a government benefit, so to speak, in the form of food and housing. Because of this, your Social Security benefits will be suspended if you’re in prison for 30 days or longer. You're then eligible to have your benefits reinstated the month following the month of your release.
Of course, there are plenty of good reasons why you shouldn’t break the law. But not losing Social Security is another one to consider.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
4. Living abroad as a non-US citizen
As a non-U.S. citizen, you may be entitled to Social Security benefits if you pay into the program. However, if you leave the country, your Social Security payments are typically frozen after six months.
If you return to the U.S. after spending time abroad, you may be eligible to have your benefits reinstated once you’ve returned for an entire calendar month. You may also qualify for an exception allowing you to continue receiving benefits abroad even without visiting the U.S.
5. Exceeding the earnings test limit
If you’re receiving benefits from Social Security, you can still earn money from a job. Once you reach full retirement age, you can earn any amount of income without it negatively affecting your benefits. But if you’re working and collecting Social Security benefits before reaching full retirement age, you’ll have benefits withheld for exceeding the earnings test limit, which changes every year.
The earnings test limit for 2024 is $22,320, unless you'll be reaching full retirement age before the end of the year, in which case it's $59,520. If you’re 64 and therefore won’t reach full retirement age this year, for every $2 you earn beyond that $22,320, you have to give $1 in Social Security back.
However, that money isn't forfeited forever — it’s added back into your monthly benefit once you reach full retirement age.
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Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
