3 Reasons People Lose Social Security Benefits

For most people, Social Security benefits are an important part of their retirement budget. While it’s important to take steps to maximize your benefits, certain things may also cause you to lose your benefits, or to get less than you could be getting.

Here are three things that can affect your Social Security benefits without you even knowing.

Taxes

If you decide to earn some extra cash during retirement while receiving Social Security benefits, you may pay taxes on the benefits you’re earning. Though you’ll never pay taxes on more than 85% of those benefits, it may come as a surprise if you’re not aware of it. If most of your income comes from your Social Security benefits, you likely will not be taxed on them at all.

To figure out if you’ll be subject to these taxes, you can calculate your combined income. The percentage of taxable benefits depends on that number. If you determine it’s not worth it to work and collect benefits, you could delay receiving Social Security, which will only earn you more over time.

Withholding

If you decide to start collecting Social Security benefits before you’ve reached full retirement age, some of your benefits may be withheld. Social Security will deduct $1 from your benefits for each $2 you earn over a certain amount.

However, this money doesn’t disappear entirely—it goes back into the benefit checks you receive later in life, meaning you’ll earn it back after you reach full retirement age.

Bad planning

Bad planning is perhaps the biggest thing that can affect the size of your Social Security checks. For example, delaying when you start to receive benefits will increase the size of your checks about 8% for each year you delay. If you can afford to delay, you’ll see larger checks when you do start collecting. However, if you start collecting at age 62, you’ll receive more checks over time. Other factors, such as your spouse’s lifetime income or whether you’re divorced, can also affect the amount you receive.

The bottom line is that it’s important to consider when you’ll start withdrawing your Social Security benefits and, if you’re married, whether you want to withdraw both of your checks at the same time or stagger them. Thinking through your strategy ahead of time can help you increase the amount you receive in the long run!

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