Starting and Stopping Social Security Benefits -Avoiding Social Security Overpayments

Starting than stopping social security benefits is possible. There are times when the Social Security Administration stops your benefits against your will, and there’s a few ways that you can stop benefits at your request.

Let’s start first at your request. The first 12 months you are drawing social security you can request the Social Security Administration to stop your benefits. The catch is that you have to pay back the benefits, in full, that you have received. The repayment plan can be made with the SSA, and those funds get added back into your social security fund, typically the year of your full retirement year, as determined by the SSA, and can be re-drawn as part of your monthly benefit, later.

The second time is a voluntary suspension where you can request your funds to be stopped is once you reach your full retirement year, and you have been drawing benefits for at least 12 months, benefits can be stopped one more time, and you can start to draw any time later. Why would someone do this? Between your full retirement year, typically age 66 or 67 depending on your birthdate, and age 70, your benefit will grow 8% per year for those three years, when not drawing social security. Some people run into a source of income, and don’t need social security during that time. Remember, once you pass your social security full retirement age, you can work and receive social security simultaneously without any income earned penalty. The income penalty exists when you take benefits prior to your full retirement age and work at the same time. As of 2024, the maximum income you can make is $22,360 per year. Any income over that, you will experience a penalty, again until after you pass your full retirement year. The first year you receive benefits, it’s a monthly income penalty (22.360/12= $1863.33) not just an annual penalty, this is called the Grace Year. It’s important you read up on the Grace Year here, it’s a unique rule, a lot of overpayments happen due to people not knowing this rule. All years prior to your full retirement age year, the maximum earnings amount goes up a bit, so it’s important to check each year what that limit is. The year you reach your full retirement age, and if you are drawing social security simultaneously, the maximum earnings is $59,520 only for that year. The penalties are stiff. Prior to your FRA, for every two dollars earned over the $22,360, you have to pay back $1 to the SSA. Your FRA year, you pay $1 for every $3 earned over the maximum earning limit. After your FRA year, there is no more penalty.

When the SSA involuntarily stops your benefits, it’s may involve a social security overpayment. This typically comes into play because of a rule violation triggered by an income or marital related change, however, there are several other reasons as well. When it’s a rule violation, that typically means you will have to pay a portion of your benefits back to the SSA or may not receive a benefit for a while until the cumulative held benefits equal the dollar amount of the social security overpayment determined by the SSA. The overpayment agreement would be made with the SSA, so a visit to your local SSA satellite branch will be needed but call first so you know what kind of documentation you may need to bring with you to the appointment. Overpayments can cause people in need of benefits heartache or financial hardship and people frequently challenge the SSA, since they do not want to experience the social security overpayment. In 2020, 756,000 were overpaid benefits by the SSA to the tune of $4 billion. Of the 756,000 people overpaid in benefits, only 32,000 had their social security overpayment, overturned (didn’t have to pay it back). Also, if you are receiving benefits based on someone else’s benefit, such as a disability or survivor benefit, those benefits will also be negatively affected by the social security overpayment. If a financial hardship is apparent and can be documented, the SSA may overturn the overpayment and it may not need to be paid back, but it must make sense to the SSA and again, well documented.

If you land an unexpected new job while on social security, you may also call them and ask them to suspend your benefit as well, this is on a case by case basis, but you must initiate the contact with the SSA otherwise your benefit will still keep coming and if you go over the social security annual earnings limit, you will experience a social security overpayment.

If you are taking your own benefit, and later would like to switch to the spousal benefit, if it’s higher than your own benefit, that would involve suspending your benefit, but the SSA will not automatically switch you to the spousal benefit which is available once your spouse starts drawing social security. You have to contact the SSA and advise them and let them know that is what you would like to do. When we typically talk about starting and stopping your social security benefit, it is when you are not to receive a benefit of any kind for period of time.

Kevin Walton RSSA is located in Ventura County, California and helps people nationwide with all things social security. If you have any questions or concerns of how to stop your social security benefits, please feel free to contact me by phone, email or fill in the scenario form below and we will reach out to you.

Warm regards,

KW