Many Americans consider their future Social Security benefits crucial to their retirement plans—while for a lot of people with next to nothing saved for retirement, their Social Security benefit is their retirement plan. Though the average monthly benefit is just $1,907—or close to $23,000 a year—that’s certainly better than having no income at all in your later years.
However critical Social Security is to your personal retirement plans, you can’t take it for grated. Yes, there’s always the possibility that Social Security will “run out of money” at some point if our elected officials can’t find a solution to its funding issues. But while you can’t do much about that, it’s worth being aware of the ways you can jeopardize a portion of your benefits—or all of them—under some specific scenarios.
Here are four ways you can lose some or all of your Social Security benefits, even after you’re eligible to claim them.
You wind up in jail or prison
If you find yourself incarcerated for more than 30 days for any reason, Social Security assumes that the government is now paying your bills and will suspend your payments for the duration of your glamorous stay in that facility. The good news is that anyone who gets benefits through your work record (like a spouse) will continue to get their benefits, and you can resume getting yours a month after your release. Still, if you do a five-year stretch somewhere, you’ll have lost an average of about $115,000 that could have landed in your bank account. And if you find yourself in prison for the rest of your life, you might never see a dime of Social Security.
You exceed the income limits
Social Security payments are based on your retirement age. For most of us, that’s age 66 or 67, but you can elect to start receiving your benefits earlier (age 62) or later (age 70). If you wait until you’re full retirement age to retire, you can actually work as much as you want—your earnings won’t affect your benefit. But if you retire “early,” you’ll have to be careful until you reach full retirement age.
Retiring early gets you lower benefits (by up to 30%, depending on your age)—and the Social Security Administration is aware that some sneaky folks will “retire” at 62 to get their Social Security and then continue working. So they have this thing called the earnings test, or income limit—if you earn too much money, your benefits are reduced accordingly. The income limit changes annually (currently, it’s $22,320, and next year it’ll be $23,400). For every $2 you earn over that limit during the year, they will deduct $1 from your benefits. It’s possible to earn so much that you wipe out your benefit entirely, although if you’re making that much money, you might not care. And you don’t technically “lose” this money, it’s just deferred—you’ll get higher benefit checks later, once you reach full retirement age. But if you’re counting on that money to pay your bills month to month, be very careful about how much extra income you earn.
You have to pay back taxes or restitution
Some folks are surprised to learn that Social Security payments—which we fund by paying FICA taxes out of our income before we retire—are actually taxed. A fun fact is that if you don’t pay federal taxes and wind up owing the IRS money, they can—and certainly will—levy 15% of your Social Security payment to claw back that money. Your Social Security payments can also be garnished to pay court-ordered stuff like child support, alimony, or restitution. If your life gets real messy after you retire, you can see a significant amount of your benefit diverted to other accounts.
You get remarried
This is a bit niche, but if you receive benefits based on your spouse’s work record, you can continue to receive those benefits even if you get divorced (as long as the marriage lasted at least 10 years). There’s one way to lose those benefits: Get remarried. If you marry someone new, you’ll lose your ex-spouse’s benefits.
Plot twist: If your new marriage ends in divorce as well (or an annulment, or death) you can have your benefits pinned to your prior ex-spouse reinstated.
You give them up on purpose
Finally, there’s a voluntary way to lose your benefits—you can withdraw your application. If you’ve applied for Social Security benefits before the age of 70, you can change your mind within 12 months and file form SSA-521 to request withdrawal of your application. You’ll have to pay back any money you received in that year, but your payments will be suspended.
Why would you do this? If you decide to go back to work and know you’ll exceed the income limit, you can avoid a lot of trouble by asking for a Social Security do-over. And since early retirement means lower benefits, resetting the clock means your potential benefit will continue to grow until you hit age 70, so you’ll get bigger payments later.