Three Surprising Ways to Lose Some of Your Social Security Benefits


Every dollar counts for a retiree. This is especially true for Social Security retirement benefits, as they are a guaranteed source of income for life.


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Regrettably, there are a number of ways in which you may inadvertently lose some of the money that the Social Security Administration is supposed to send you. Many people are unaware of three possible explanations for why some of their payments may go missing. Here they are.


1. If you work and collect benefits concurrently

Many retirees are surprised to learn that taking a job during retirement may result in them losing some or all of their Social Security benefits.

This is a problem for a subset of seniors — those who began receiving benefits prior to reaching full retirement age (FRA). The FRA age ranges from 66 to 67, depending on your birth year, but benefits can be claimed years earlier — as early as 62.

For those who begin receiving benefits prior to the FRA but continue to work, Social Security benefits are temporarily forfeited once earnings exceed a certain threshold. To be precise, $1 in benefits is forfeited for every $2 earned above $19,560 in 2022 if you work but do not reach full retirement age during the year. Additionally, $1 is deducted for every $3 earned above $51,960 if you anticipate reaching FRA during the year but have not yet done so.

While these thresholds increase over time, the fact that benefits cease to exist at a certain level of earnings does not. And because the Social Security Administration withholds entire retirement checks to account for forfeited income, you could go months – or even a year – without receiving a retirement check.

Eventually, if you miss payments, your benefits are recalculated at FRA, and you end up with more money each month. However, if you’ve constructed your budget around receiving both a paycheck and Social Security, you’re out of luck.


2. If you are liable for federal income tax on benefits

Additionally, you could lose some of your retirement benefits if you owe federal taxes on them, which may come as a shock if you assume these earned benefits are tax-free.

Regrettably, an increasing number of retirees each year will lose a portion of their retirement income to the IRS, as the thresholds at which benefits become taxable are not indexed for inflation and have remained constant since the 1980s – despite increases in senior wages and incomes.

Once your provisional income reaches $25,000 for single filers and $32,000 for married joint filers, a portion of your benefits becomes taxable. Provisional income is equal to half of your Social Security earnings, as well as all taxable and some non-taxable earnings. Depending on your income, up to 85% of your benefits may be taxable. If this comes as a surprise, it will have a significant financial impact.


3. If you are liable for state income tax on benefits

State taxes may also result in the loss of some of your benefits if you live in one of the 13 states that tax Social Security benefits in some circumstances.

These states include the following:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • Mexico Nuevo
  • Dakota du Nord
  • State of Rhode Island
  • Utah \Vermont
  • West Virginia

While not everyone in these locations will owe taxes, it is critical to understand the rules – especially if you are a higher earner who is more likely to be taxed.


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Due to federal and state taxes, as well as the effect of working, you may receive hundreds or even thousands of dollars less in Social Security benefits than anticipated. You must prepare for this reality prior to retirement in order to have a realistic understanding of what your retirement benefits will actually accomplish for you.

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