Social Security is a vital source of income for many seniors, but there are several ways that retirees could lose some of their benefits. According to a recent survey, only 48% of respondents knew that Social Security benefits are not tax-free. Whether or not you pay taxes on your Social Security income depends on your combined income, which is the sum of your adjusted gross income, nontaxable interest income, and half your Social Security benefits.
If your combined income exceeds certain thresholds, a portion of your benefits becomes taxable. For individuals, if your combined income is less than $25,000, none of your benefits are taxable. If it’s between $25,000 and $34,000, up to 50% may be taxable.
If it’s more than $34,000, up to 85% may be taxable. For married couples filing jointly, if your combined income is less than $32,000, none of your benefits are taxable. If it’s between $32,000 and $44,000, up to 50% may be taxable.
If it’s more than $44,000, up to 85% may be taxable.
ways retirees lose benefits
Another way you could lose some of your Social Security benefits is by working while collecting them.
Just 54% of survey respondents knew that some benefits could be withheld if they’re still working while collecting Social Security. For 2024, the retirement earnings test reduces your monthly benefit by $1 for every $2 earned over $22,320. For those reaching full retirement age this year, the limit is $59,520, with a reduction of $1 for every $3 above that threshold.
However, the Social Security Administration adjusts your benefit amount at full retirement age to account for those withheld benefits. Finally, if you’re collecting spousal benefits, your payments depend on your spouse continuing to receive their Social Security benefits. If your spouse suspends their benefits, this could result in a lower benefits check for you.
A crucial stipulation of spousal benefits is that the primary earner must also receive Social Security for the spouse to be eligible. If your spouse withdraws their application or suspends benefits, you might need to switch to collecting based on your own earnings record, which can be significantly lower or even $0, depending on your work history. Navigating the complexities of Social Security can be challenging, but awareness and careful planning are key to making the most of your benefits and ensuring financial stability during retirement.
