Through the different programs it runs, Social Security is a very important part of helping Americans with their money. Many people know that Social Security helps retirees by adding to their income, but it does more than that.
It helps people in three different ways: Old-Age and Retirement Social Security, Survivors Social Security, and Social Security Disability Insurance (SSDI). Even though Social Security is very important, benefits are not always promised for life. When certain conditions are met, these payments may be cut back or even stopped.
Old-Age/Retirement Social Security
Social Security retirement benefits are usually a monthly payment that covers some of a person’s income after they stop working or cut back on their hours. To get full retirement benefits, you have to hit a certain age. This age is called the “full retirement age,” and it changes based on your birth year.
People who were born between 1943 and 1954 can retire at age 66, but people who were born after 1960 have to wait until age 67. People can start getting benefits as early as age 62, but if they do, their monthly payment will go down for good.
Benefits are cut by 5/9ths of 1% for every month before the full retiring age, up to 36 months, if they are claimed before that age. If benefits are claimed even earlier, they will be cut by another 5/12ths of 1% per month.
This means that a person whose full retirement age is 67 and starts getting benefits at age 62 will see a 30% drop in their monthly payment. If you wait to leave past the full retirement age, on the other hand, you will get more benefits through delayed retirement credits. These benefits will stop growing at age 70.
Impact of Earnings on Social Security Benefits
People who are getting Social Security benefits and want to work before they hit full retirement age are limited in how much they can earn without their payments stopping. For example, in 2024, people who earn more than $22,320 but are not yet fully retired will have $1 taken out of their benefits for every $2 they earn over that amount. When people turn 65 in 2024, $1 will be taken out of their benefits for every $3 they make over $59,520.
There is, however, a special rule for people who leave in the middle of the year. If their earnings for the rest of the year drop below a certain monthly limit, they will get full Social Security payouts for every month that their earnings fall below that limit. If more benefits are taken away than are needed, the extra is returned the following year after proof of salary.
Earnings are measured differently for people who are working or not working. For employees, wages count toward the earnings cap. For self-employed people, only net earnings count. Investment income, government payments, pensions, and other income that isn’t from work doesn’t count toward these limits. But payments to retirement plans that are part of your gross pay do count.
Survivors Social Security
Survivors benefits are given to widows, widowers, and dependents of workers who are qualified. The amount is based on how much the worker who died made. Eligible family members include living spouses, divorced spouses (if the marriage lasted at least 10 years), and children under 18 who are not married (or under 19 if they are still in school).
Of course, there are times when survivorship benefits may not be given. For instance, a surviving partner can’t get survivors benefits while they are married if they get married again before they turn 60 (or 50 if they are disabled).
Kids who don’t have problems stop getting benefits when they turn 18, unless they are still in school, in which case they get them until they turn 19. But children with problems that started before they turned 22 will continue to get help for the rest of their lives.
Social Security Disability Insurance (SSDI)
People with disabilities who are unable to work can get cash help from SSDI. To be eligible, the person must have worked enough in the past and have a disability that keeps them from doing substantial economic activity. But there are times when you can lose your SSDI payments.
For example, the person’s benefits could be stopped or suspended if they make more than the allowed amount during a trial work period or a longer time of eligibility. SSDI users must also go through regular checks to make sure they are still eligible for benefits. How often these checks happen depends on how likely it is that the person’s health will get better.
Also, when a person receiving SSDI hits full retirement age, their disability benefits automatically change to retirement benefits, since no one can get both at the same time. People who are in prison may also lose their SSDI payments, but they can be reinstated after they get out.