Mistakes That Could Cost You Your Social Security Benefits

Sixty-eight million Americans access Social Security every year, resulting in $1.5 trillion in benefits. With 37% of men and 42% of women over 65 years of age relying on social assistance to provide half or more of their income, you can see why it would be very bad to lose your Social Security. However, back in 2019, a United Income report, titled "The Retirement Solution Hiding In Plain Sight" (via Forbes), found that retired Americans lose $111,000 in potential benefits per household — the equivalent of $3.4 trillion collectively — based on entirely avoidable mistakes.

Considering the average Social Security benefit for retirees by age, and that declining income earning power contributes to 17 million seniors being financially insecure in their retirement, the last thing anybody should want is to lose their benefits entirely. However, suspension and even permanent loss of benefits can happen, particularly when you aren't following specific rules or are flagrantly breaking the law.

In fact, as per a report from the Center on Budget and Policy Priorities, some 70,000 have their benefits suspended annually, while 40,000 Americans lose their benefits permanently after 12 months of suspension. Due to the sometimes complex rules around receiving benefits, it can even happen accidentally. This said, here are a few mistakes to avoid if you don't want to lose your Social Security benefits.

It may be a bad idea to work during early retirement, depending on the size of your earnings versus the size of your Social Security benefit. First off, early retirement already incurs an automatic penalty of 30% on your benefits, which is the government's way of encouraging you to stay in the workforce a little longer. However, if you take a job after already taking retirement to generate additional income, depending on your age, you could suffer worse consequences.

If you're below full retirement age in 2024, prepare yourself to lose a dollar for every two dollars you earn over $22,320 for the year. If you hit full retirement age in 2024, the situation is only slightly better since you'll lose one dollar for every three dollars you earn over $59,520 until your birthday. Ultimately, earning too much money on the side can actually erase your Social Security benefits if you haven't reached full retirement age, and while your benefits will rise to factor in those clawed-back benefits at full retirement age, the years in between could be costly.

Your full retirement age is based on when you were born. If you were born before 1954, your retirement age is 66, while anyone born after 1960 will reach full retirement at 67 years old. So while we have some suggestions about things you should do to increase your savings during early retirement, working isn't one of them. (See how much the U.S. annually spends on Social Security.)

If you become unable to work or are otherwise classified as disabled, you may be taking disability payments in order to shore up your household income. While that isn't a problem in and of itself, the Social Security Administration will penalize you for returning to work while continuing to take disability. Known as substantial gainful activity, earning over $1,550 per month ($2,590 for the blind) in addition to your disability check will likely result in the termination of your benefits.

Although you may have a grace period of a final payout in the month your benefits are terminated, including the proceeding two months after, that will effectively end your payments unless you suddenly start earning less money. The flip side of this scenario is when the Social Security Administration determines that you no longer qualify for disability because you've gotten better. As with the previous situation, you'll have a three-month grace period after the benefits are terminated, but that's it.

This can have impacts for lower income households experiencing financial challenges. For example, in June 2024, NPR detailed how purchasing life insurance to assist with paying for her funeral cost one Philadelphia woman her benefits. Disabled and receiving Supplemental Security Income, Karen Williams didn't realize her insurance carried a $1,900 cash value. Combined with the $260 in her savings account, this carried Williams over her $2,000 monthly income limit. Not only were her benefits terminated, but she was ordered to pay back two years of benefits equal to $20,385.