Essential things to know about your Social Security benefit: Part 2

Suppose you receive a pension from work not covered by Social Security taxes, such as a CSRS retirement benefit. In that case, you may be impacted by the Windfall Elimination Provision and/or the Government Pension Offset.  

The bipartisan Social Security Fairness Act — which now has 318 cosponsors — would eliminate both the WEP and the GPO, two provisions of the Social Security Act that often unfairly reduce or eliminate Social Security benefits for millions of Americans who have devoted much of their careers to public service — including federal employees, police officers, firefighters, and educators. The WEP impacts approximately 2 million Social Security beneficiaries, and the GPO impacts nearly 800,000 retirees. 

Are you receiving Social Security benefits and continuing to work? 

When you reach your Full Retirement Age, you can work and earn as much as you want while still getting your full Social Security benefit. 

However, if you’re younger than FRA and your earnings exceed specific dollar amounts, some of your benefit payments will be withheld. If you have earned income up to $22,320 in 2024, this will not reduce your benefit amount. This limit increased from $21,240 last year. For every $2 in earnings above that limit, $1 in benefits will be withheld. If your benefits are terminated because you continue to work and earn enough to offset your benefit by 100%, your benefit will be higher when you reach your FRA because Social Security will eliminate the age reduction for those months you were not entitled to benefits due to your high earnings.   

If you think your earnings will be different than what you originally told the SSA, you should let them know right away by calling 1-800-772-1213 (TTY 1-800-325-0778), 8:00 a.m. – 7:00 p.m., Monday through Friday, or contacting your local Social Security office. You cannot report a change of earnings online.  

Tip for CSRS employees: If you are a CSRS employee working past your FRA, you may receive Social Security retirement, spousal, or survivor benefits without any effect from the WEP and GPO until you begin receiving your CSRS benefit.   

What happens if you are overpaid by Social Security? 

According to a March 2024 SSA publication, an overpayment occurs when you receive more money than you should have been paid. If this happens, you will be notified by mail to explain why you’ve been overpaid, your overpayment amount, your repayment options, and your appeal and waiver rights. One option will be to request a lower repayment. A recent change allows SSA to collect the greater of $10 or 10% of the beneficiary’s total monthly Social Security benefit to recover the overpayment. Before the change, SSA would have demanded 100% to be repaid immediately. There will be exceptions, such as when an overpayment resulted from fraud. You may also request a longer recovery period: If a beneficiary asks for a rate lower than 10%, the SSA will approve the request if the new rate will pay back the overpayment within 60 months, up from 36 months before the changes. 

There is also a simpler appeal process that allows a recipient who believes the overpayment was not their fault. In this case, they may appeal the overpayment decision and/or the amount and ask the SSA to waive collection. The agency does not pursue recoveries while an initial appeal or waiver is pending. The SSA has also introduced new, more affordable repayment options. 

State Income Taxes 

Only 10 states now tax Social Security benefits, which is down from 12 states a year ago. Missouri and Nebraska both ended state income taxes on Social Security benefits effective Jan. 1, 2024t. The new policies are expected to save beneficiaries up to $309 million a year in Missouri and $17 million a year in Nebraska. Again, this doesn’t directly impact benefits but can lead to tax savings. 

For the 2024 tax year, the states that continue to tax Social Security benefits include Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Policies in states that impose tax on Social Security income vary, but offer a break or exemptions based on income and/or age. A few states are currently considering legislation that would significantly expand exemptions and deductions for Social Security recipients. Deductions are subtracted from a person's taxable income, lowering the amount of tax owed. 

Longevity Insurance

Social Security is a social insurance program that provides an inflation-protected lifetime annuity to retirees and their dependents. Those who choose to delay claiming Social Security benefits essentially purchase additional longevity insurance—reducing the risk of “running out of savings”—by raising his or her lifetime monthly benefit. For many federal employees, Social Security is an important piece of the retirement puzzle, with many beneficiaries receiving replacement of approximately one-third of pre-retirement income. Social Security, along with the FERS basic retirement benefit and the Thrift Savings Plan, can provide the financial security you will need during your life after retirement.  

Lawmakers have many policy options to address the upcoming Social Security Trust Fund shortfall that must be addressed before 2035, including increasing contribution rates, lifting the cap on contributions subject to contributions, drawing on other revenue sources, lowering benefit amounts, or a combination of changes. Social Security’s independent actuaries have analyzed over 100 policy proposals from lawmakers on both sides of the aisle, and those results are available on the Actuary’s website. Lawmakers must address the long-term shortfall soon and preserve the reserves that provide interest income to help pay future benefits.