Social Security is a vital source of income for many retirees in the United States. However, there are several ways that seniors could lose some of their Social Security benefits. One way is through taxes.
Only 48% of respondents to a recent survey knew that Social Security benefits are not tax-free. If your combined income exceeds certain thresholds, a portion of your benefits become taxable income. You’ll owe regular income tax on the taxable amount.
Another way is by working while collecting Social Security before reaching full retirement age. If you earn more than $22,320 in wages during 2024, the government will reduce your monthly benefit by $1 for every $2 above that limit.
Tax and spousal benefit reductions
There’s an exception for those reaching full retirement age in the current year, raising the limit to $59,520. A third way you could lose some of your Social Security benefits is if your spouse stops receiving their benefits. If you’re collecting spousal benefits, you may be surprised by a lower benefits check if your spouse decides to suspend their benefits.
One important stipulation of spousal benefits is that the spouse whose earnings record you’re collecting on must also receive Social Security for you to be eligible. It’s important to be aware of these rules and plan accordingly. While it might make sense for an individual to withdraw or suspend their benefits, it’s important to consider the dynamics of the entire household’s income in any decision.
Social Security is a complex program, but it pays to know the rules. By understanding how taxes, working while collecting benefits, and spousal benefits work, retirees can make informed decisions and keep as much of their monthly checks as possible.
