6 Types of People Who Can’t Rely on Social Security

6 Types of People Who Can’t Rely on Social Security
Photo by 161359034 / Shutterstock.com

When we think about retirement planning, Social Security is an essential part of the equation. But not everyone can expect to receive benefits.

People who didn’t pay into the Social Security system, or didn’t pay enough into it, as well as people in certain other situations may be ineligible for retirement benefits.

Following are several specific types of folks who should not count on receiving benefits.

1. Infrequent workers

To receive Social Security retirement benefits, most people need to accumulate at least 40 “credits” during their working lifetime, according to the U.S. Social Security Administration (SSA).

Currently, you can earn up to four credits per year if you work and pay Social Security taxes.

So it’s perhaps no surprise that people who didn’t work enough to qualify for benefits, and immigrants who arrived in the U.S. late in life and didn’t work enough to qualify, make up more than 80% of the people who have never received benefits, SSA data shows.

2. Noncovered workers

Not every worker pays into the Social Security system. In certain states, public employees are not covered by Social Security due to receiving a pension.

They can include employees of state and local government agencies, including school systems, colleges and universities. In some states, they may also include police officers and firefighters.

3. Certain debtors

Do you owe the government money? If so, you might have some of your Social Security benefits withheld to help pay the debt.

If you have overdue federal tax debts or federal student loans, the government can garnish your benefits, as we detail in “10 Things That Could Hurt Your Social Security Payments.”

On top of that, if you owe child support or alimony, you could see your benefits diminished to cover those obligations.

4. Certain expatriates

If you retire in a foreign country, in most cases, you can receive your Social Security benefits there.

In fact, in April, the Social Security Administration sent a total of about 686,000 payments to beneficiaries outside the U.S., and 98% of those payments were made by direct deposit.

The foreign country to which the SSA sent the largest number of those payments — about 112,000 of them — was Canada. However, there are some countries to which the SSA generally can’t send money. They include:

  • Azerbaijan
  • Belarus
  • Cuba
  • Kazakhstan
  • Kyrgyzstan
  • Moldova
  • North Korea
  • Tajikistan
  • Turkmenistan
  • Ukraine
  • Uzbekistan

The SSA does make exceptions in some situations — but not for situations involving Cuba and North Korea.

“The U.S. Department of the Treasury prohibits making payments to persons residing in Cuba or North Korea,” the SSA says.

However, if you are a U.S. citizen living in either of those nations, your Social Security benefits will be held for you and paid out when you move to a country to which the SSA can send payments.

Use the SSA’s Payments Abroad Screening Tool to see if you could receive your benefits as an expatriate.

5. Many prisoners

The Social Security program prohibits payments to most prisoners, according to the SSA. Benefits are suspended for people who have been incarcerated for more than 30 consecutive days due to being convicted of a crime.

The SSA explains:

“By law, you cannot get payments for any month — including any part of the month — in which you have been convicted and confined in a correctional facility for more than 30 consecutive days.

For example, if you were convicted and confined on March 29, 2018, and you remained in jail until May 2, 2018, you would not get benefits for the months of March, April or May because you were in jail for 35 consecutive days.”

6. Self-employed people who don’t report

People who work for employers get help reporting their earnings to the Social Security Administration and paying their Social Security taxes.

Specifically, employers do all of the following on behalf of workers:

  • Report workers’ wages to the SSA so that workers receive the Social Security credits they earned.
  • Deduct half — 6.2% — of workers’ Social Security taxes from workers’ paychecks and send the money to the IRS.
  • Match the other half of workers’ Social Security taxes and send the money to the IRS.

However, self-employed people are required report their own wages and pay the full 12.4% in Social Security taxes to the IRS. This includes submitting an IRS form known as Schedule SE.

The SSA explains:

“If your net earnings are $400 or more in a year, you must report your earnings on Schedule SE, in addition to the other tax forms you must file. … Even if you don’t owe any income tax, you must complete Form 1040 and Schedule SE to pay self-employment Social Security tax. This is true even if you already get Social Security benefits.”

If you’re self-employed but aren’t reporting all of your earnings or aren’t paying Social Security taxes, you likely aren’t building up Social Security credits or aren’t building up as many as you should. Depending on the severity of your situation, you could therefore end up not receiving retirement benefits later on.

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