Social Security Benefits: How It Works, Types of Benefits, How you can lose


Social security is a social benefit provided by the US federal government. The benefit is administered by the Social Security Administration (SSA). SSA issues Social Security Card. Generally, it can be issued to three categories such as the US citizens, Permanent Residents and Non-citizens who work in the US subject to conditions like if you had paid social security taxes while you worked earlier.

The tax you paid goes into a trust fund, that when you retire from work you are eligible for the social security. Other than the retirement benefit, you may also be given other benefits such as disability benefits, benefits for spouses or other survivors of a family member who has died and the third benefit is called Supplementary Security Income (SSI).

However, the above four mentioned social security benefits cannot be taken for granted forever once you have been issued a social security card. There are issues and challenges coming in the way. There are about ten possible ways of losing your benefits which are discussed here.

Filing time and its consequences । SOCIAL SECURITY BENEFITS

A premature claim of Social Security may cost you dearly. As per the norms of Social Security, the normal or full retirement age is somewhere between 66 and 67.

That means one can retire from work any time like 66 years and one day or more till you attain a full blown age of 67. Only this would most probably fetch you a benefit as high as possible.

However, it is not mandatory that you should claim social security post-66/67 years of age. You can, rather, claim the benefit right from the age of 62; but doing this would accrue you a lesser benefit compared to the one claims at age between 66 and 67.

For instance if your retirement age is 67, but you file claim of benefit at age 62 then your benefit will suffer a decrease in 30%. There are several instances where beneficiaries of social security file the benefit at age of 62 due to issues like job loss or health risks.

In this case, reduction of 30% remains permanent unless you withdraw your claim and pay back whatever you got.

If you are still earning high even after availing social security then your benefits will be reduced. This is done with a view to do adjustment between your social security benefits and your earnings thereafter. Having done this adjustment would likely reflect the national wage trends.

In this regard, let’s see some statistics. The ceiling in 2019 was fixed at USD 17,640. In this case, from every 2 Dollar you earn over that, you lose 1 Dollar in benefit. Therefore, it is clear from this capping that during the year you turn your full retirement age, the cap rises to 46,920 Dollar.
Taking a spousal benefit prematurely is not advisable.

It is wise for one to wait until one’s full retirement age. Otherwise, taking a spousal benefit at 62 will have a consequence of benefit reduction up to as little as 32.5% of your wife’s or husband’s benefits.

Mostly, this type of benefit is claimed by spouses having lopsided income- one having a very low income compared to his/her spouse. In this case, a lower-earning partner can receive up to 50% of the monthly benefit that the higher income-partner has coming at full retirement age.

Technology on Identity issues

In case of your identity being stolen. You could fall prey victim to fraudsters. You need to be extra careful while maintaining your Social Security account. For a better and safe account, you may go to at Keep a vigilante eye on your account.

According to the reports of Javelin Research, Social Security numbers are more prone to hacking than credit card numbers. Numerous attempts of website hacking have been identified over the years.

As many as 58,000 allegations of fraud have been registered over the last three years.
If you have been scammed. Hoax callers in the guise of Social Security Administration have been increasing at an alarming rate.

From March 2018 to March 2019, over 76,000 beneficiaries have reported Social Security phone scams. The Federal Trade Commission says that this resulted in the loss of as many as 19 million Dollar.

Taxes versus Income

Post-retirement income entails you to pay taxes from your benefits (SS). Thirteen states apply taxes to social security benefits.

These taxes depend on how much you earn Post-retirement from your previous employer. You will have to pay this particular tax if your individual income is more than 25,000 Dollar or 32,000 Dollar as a married couple jointly filing the benefit.

Here, the portion of the tax could be 50% or 80% as the case of your income may be. “Income” in this case is defined as the sum of your adjusted gross income, your non-taxable interest and half of your annual Social Security.

Your Social Security benefit may suffer if you have a history of not paying student loans, back taxes and alimony. Debts can be of a stumbling block for any age group, but most punishing in retirement.

The debts you have would all be offset with your social security. “Offset” here means clearing all your debts which stem from back taxes, unpaid alimony or child support, and defaulted student loans. Alimony means a financial support or maintenance fee a husband is bound to pay to his divorced wife on the direction of court.

The Credit Bureau Experian reported that student loan rate rose to 4.5% in the last year, and that is mostly among people who are in their 60s.

Medical Premium beneficiaries should get their social security lesser than those outside of Medical Part B Premium benefits. However, these beneficiaries are often exempted from deduction of their social security despite having high medical premium.

This happens under the “hold harmless rule” which proves to be defect in the efficient functioning of social security. This rule eats into financial viability of Social Security Administration.

Way Forward

In case if there is any amendment in the rules of Social Security. The Congress has been mulling over change in the age matters over the years. This comes into their minds because SSA doles out more money than it collects through payroll taxes.

The Congress would like to raise retirement age to 69 or 70. If this happens then a retiree would get a relatively lesser benefits as compared to what he/she currently gets. The earlier you file for the benefit the lesser you get it.

Therefore, retiring or filing at 62 could end up to a loss of 40%, according to Urban Institute Calculations. If you are a pensioner. Here if your employer did not pay into the Social Security system, then you will suffer the consequence of getting lesser benefits. This typically happens to retired government workers, teachers, railroad workers and employees of foreign companies.
Worst, your social security benefit could be cut up to 50% under the clause of “windfall elimination provision”.

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