Many Americans count on Social Security as a key part of their retirement income. But what most people don’t realize is that these benefits aren’t guaranteed under certain circumstances.
Understanding the potential pitfalls can help you plan better for retirement and avoid unwelcome surprises when you need that money most.
Working while collecting early benefits
If you claim Social Security before reaching your full retirement age (FRA) and continue working, you could see your benefits temporarily reduced. For 2024, if you’re working before your FRA, the Social Security Administration will deduct $1 from your benefits for every $2 you earn above $22,320.
In the year you reach your FRA (but before your birthday), the deduction changes to $1 for every $3 earned above $59,520. The good news? These reductions aren’t permanent. Once you reach full retirement age, your monthly benefit will be recalculated to account for those withheld benefits.
Claiming benefits early
Patience pays when it comes to Social Security. While you can start collecting as early as age 62, doing so comes with a permanent reduction in your monthly checks.
Depending on when you were born, your benefits could be reduced by as much as 30% if you claim at 62 instead of waiting until your full retirement age.
For context, if your full benefit would be around $1,900 monthly at full retirement age, claiming at 62 could reduce that to about $1,330 per month—for life. That’s a significant difference, especially when stretched over decades of retirement.
Remarriage after divorce
If you’re receiving benefits based on an ex-spouse’s earnings record, remarrying could cost you those payments. Once you say “I do” again, those benefits generally stop. However, you’ll still have access to benefits based on your own work record or potentially those of your new spouse. This is an important consideration for divorced individuals planning to remarry.
Incarceration
While not a common concern for most retirees, it’s worth noting that incarceration for more than 30 days will result in suspended Social Security benefits.
Payments resume the month following your release. If your benefits support family members, they’ll continue receiving their payments as long as they remain eligible, even if yours are suspended.
Changes in eligibility status
Social Security isn’t just for retirees. The program also provides disability benefits through Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). Recipients of these programs could lose benefits if their medical condition improves or they exceed income limits.
For those receiving disability benefits, regular medical reviews could determine you’re no longer disabled according to program standards. Similarly, if your income or resources exceed the program’s limits, you might find your benefits reduced or eliminated entirely.
Planning beyond Social Security
While these five scenarios could reduce or eliminate your benefits, there’s also broader concern about Social Security’s future funding. The program’s trust funds are projected to face shortfalls in coming years, potentially resulting in reduced benefits for everyone if Congress doesn’t take action.
The smartest approach is to view Social Security as just one component of your retirement plan. Building personal savings, investing wisely, and creating multiple income streams can help ensure your financial stability regardless of what happens with Social Security benefits.
By understanding these potential pitfalls and planning accordingly, you’ll be better positioned to maintain your standard of living throughout retirement—even if your Social Security benefits aren’t quite what you expected.
What to do: Protect your family and your future now
According to the U.S. Department of Health and Human Services, 7 in 10 people who turn 65 today will probably need some kind of long-term care.
“But won’t Medicare take care of all that?” Nope. Medicare doesn’t cover long-term custodial care — and paying for it out of pocket could take a huge chunk of your retirement savings. That, plus inflation, could scramble any nest egg.
Solution? Long-term care insurance.
One place to find it is GoldenCare. (Unless you live in the four states where GoldenCare doesn’t operate: Alaska, Florida, Hawaii and Washington.)
At least check it out and see if it’s a fit. Because a little planning today could mean a far more secure tomorrow.
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