Nearly 72 million Americans rely on Social Security benefits to help cover essential expenses in retirement, but few realize how easily those payments can be reduced—or even stopped entirely. From simple mistakes to complex legal issues, the safety net that so many depend on isn't as secure as it might seem.
While most eligible Americans receive Social Security benefits, specific circumstances can result in their loss. Although these situations are infrequent, it's possible to trigger one inadvertently. To avoid this, or plan accordingly, you must know the ways you could lose your Social Security benefits.
To date, Americans currently receive various Social Security benefits, including retirement, spousal, survivor benefits, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI). These programs provide financial support to people with disabilities, older people, and people experiencing poverty.
However, the Social Security program has specific guidelines determining how beneficiaries can increase their benefits and under what circumstances benefits may be suspended or terminated. Some retirees strategically suspend their benefits to receive a higher payout in the future.
While the suspension rules can be challenging, there's a positive aspect: in certain situations, it's possible to reinstate your Social Security benefits. However, this may require taking specific actions. Here are the pitfalls to watch out for:
1. Incarceration And Benefit Suspension
Incarceration for a felony sentence exceeding 30 consecutive days can lead to a suspension of Social Security benefits. However, it's important to note that benefits for eligible spouses or children will remain in effect. Upon release, benefits can be reinstated starting the following month.
Individuals receiving SSI will have their benefits suspended during incarceration. Upon release, SSI payments can resume starting in the month of release. However, if the incarceration period exceeds 12 consecutive months, eligibility for SSI benefits will be terminated. In such cases, reapplying for SSI benefits will be necessary upon release.
2. Returning To Work And Disability Benefits
The Social Security Administration may terminate disability benefits if recipients resume employment and their earnings surpass the substantial gainful activity (SGA) threshold. For 2024, the SGA threshold is generally set at $1,550 per month, while for individuals with blindness, it's $2,590 per month, according to a report by Bankrate.
If the Social Security Administration determines that the recipient's work activities no longer qualify them for disability benefits, payments will be discontinued in the month supported by the evidence. However, the recipient is entitled to a payout between the month of termination and the following months.
If recipients' earnings decrease, they may be eligible to reinstate their disability benefits. Additionally, recipients may participate in a trial work period without facing immediate termination of their benefits.
3. Improved Condition And Benefit Termination
Disability benefits may be terminated if the recipient's medical condition improves to a point where they no longer meet the eligibility criteria. The termination decision will take effect in the month indicated by the evidence or the month the recipient receives written notice, whichever is later.
In the event of benefit termination due to an improved medical condition, the recipient will receive a payout in the month of termination and the two following months. However, disability benefits may continue if the recipient is enrolled in a vocational rehabilitation program or a similar initiative to improve their employability.
In line with this, a 2023 report suggested that the UK government was considering a policy requiring disabled and mentally ill people to work from home to qualify for benefits. However, this information has not been officially confirmed, and its accuracy remains uncertain.
4. Early Retirement And Work Earnings
Claiming Social Security benefits early results in a reduced payout, which can be as low as 70 percent of the full retirement benefit, depending on the age of claiming. Social Security has limitations that discourage early retirement and continued employment. Excessive earnings from a job can lead to a reduction or complete elimination of Social Security benefits.
Social Security imposes penalties on early filers who exceed certain earnings thresholds:
- For individuals younger than the full retirement age in 2024, $1 of their monthly Social Security check is deducted for every $2 earned above $22,320 annually.
- For those reaching full retirement age in 2024, $1 of their monthly check is deducted for every $3 earned above $59,520 until they reach that age.
Excessive earnings can result in a complete elimination of Social Security benefits. Additionally, recipients will continue to pay Social Security and Medicare taxes on their income. However, this situation is temporary, as benefits will be reinstated upon retirement.
The reinstated benefits will include an adjustment to account for any previously withheld amounts due to employment. This is particularly significant, considering a report suggests 60 percent of Americans anticipate outliving their retirement savings.
5. Remarriage And Ex-Spousal Benefits
Unmarried individuals at least 62 years old who are divorced from an eligible Social Security or disability benefits recipient after a marriage of at least ten years may claim benefits based on their ex-spouse's record. However, remarriage will result in the termination of these ex-spousal benefits.
Remarriage can terminate ex-spousal benefits, but the loss may not be permanent. If the subsequent marriage ends due to divorce, death, or annulment, benefits can be reinstated based on the ex-spouse's record.
If an individual is eligible for Social Security benefits based on their own earnings record, remarriage will not affect those benefits. However, Social Security will only pay the higher amount between the benefits claimed on their account and those claimed on an ex-spouse's account.
Understanding the circumstances that can lead to the unintentional loss of Social Security benefits is crucial for avoiding these situations or making informed decisions.
