Social Security reduces benefit clawback from 100% to 50% for some; experts still warn of 'devastating' effects
Just weeks after announcing a 100% withholding rate on new overpayments of benefits, the Social Security has slashed the rate down to 50% for certain beneficiaries.
Yet that clawback on monthly benefit checks may still cause a financial burden for individuals who are affected, experts say.
For new overpayment notices sent on or after April 25, the 50% default withholding rate will apply to so-called Title II benefits, which include retirement, survivors and disability insurance, according to an emergency message released by the Social Security Administration.
The withholding rate for Supplemental Security Income benefits remains 10%.
More from Personal Finance:Should you wait to claim Social Security? Here's what experts sayAmericans more worried about running out of money in retirement than dyingNearing retirement? These strategies can protect from tariff volatility
"Obviously, it's better not to lose all of your income," said Kate Lang, director of federal income security at Justice in Aging, a national organization focused on fighting senior poverty.
"But if you're relying on your benefits to pay your rent or your mortgage and buy food, losing half of that income is going to be devastating and can still result in people becoming homeless," Lang said.
Beneficiaries may owe the Social Security Administration money due to overpayments — when their monthly benefit checks are more than what they are owed. The erroneous payments can happen for a variety of reasons, such as if a beneficiary fails to report a change in their circumstances to the agency or if the agency does not process information promptly or enters errors in its data.
When the Social Security Administration determines a beneficiary has been overpaid, a notice is sent to request a full and immediate refund, according to the agency.
Beneficiaries typically have 90 days to request a lower rate of withholding, a reconsideration or waiver of recovery. If they do not make such a request within that 90-day window, the agency will withhold up to 50% of their benefits until the sum of the amount that was overpaid is fully recovered, according to the agency's update.
The Social Security Administration had previously announced that it would increase the default withholding rate for overpayments to 100%. Under President Joe Biden's administration, the default withholding rate had been dropped to 10% of a beneficiary's monthly benefit or $10 — whichever was greater. Generally, the rate beneficiaries are subject to is based on the terms at the time they were notified.
"In the last 100 days, we've gone from as low as 10 [percent] to 100 and now to 50," said Richard Fiesta, executive director of the Alliance for Retired Americans.
The 100% withholding rate was "ridiculously draconian and cruel," Fiesta said. The Social Security Administration had said the change to that full recovery rate would generate about $7 billion in program savings in the next decade, based on estimates from the chief actuary.
Yet even with the default withholding rate cut in half, beneficiaries may still struggle financially.
"Losing 50% [of benefits] for a lot of people could put them into immediate economic hardship," Fiesta said.
In most cases, it wasn't the beneficiary's fault that they were overpaid, Fiesta said. "They shouldn't be put in a worse situation because of something they never caused in the first place," he said.
While beneficiaries do have the ability to negotiate the payments, there is no guarantee they will be successful and the outcomes may vary, according to Lang.
"There are thousands of employees that individual beneficiaries are going to be dealing with to ask for a waiver or ask to negotiate a different repayment rate," Lang said. "And those employees have a lot of discretion in what they decide."
Beneficiaries who are dealing with overpayment issues also face long wait times to make an appointment to visit a Social Security Administration office, which can interfere with their ability to exercise the options available to them, she said.
The Social Security Administration did not respond to CNBC's request for comment.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
2 hours ago
- Yahoo
A New Social Security Garnishment Is Set to Begin This Summer -- but There Are 2 Legal Ways Most Retirees Can Avoid It
Getting as much as possible out of Social Security isn't a luxury for most retirees -- it's an absolute necessity. This summer, the Trump administration will begin garnishing up to 15% of Social Security benefits for delinquent federal student loan borrowers. Two perfectly legal solutions exist that may allow a majority of tardy federal student loan borrowers to avoid having their Social Security checks garnished. The $23,760 Social Security bonus most retirees completely overlook › For most retirees, Social Security isn't just income that's deposited into their checking or savings account on a monthly basis. It represents a financial lifeline that many would likely struggle to make do without. In 2023, Social Security was responsible for lifting 22 million people above the federal poverty line, some 16.3 million of whom were adults aged 65 and above. Meanwhile, 23 years of annual surveys from national pollster Gallup find that up to 90% of retirees require their monthly benefit, to some degree, to make ends meet. Getting as much out of Social Security isn't a luxury -- it's often a necessity. But beginning sometime this summer, select retirees can expect their Social Security checks to shrink by up to 15%. For some of these beneficiaries, it's income they simply can't afford to lose. For well over six decades, the federal government has played a role in subsidizing and guaranteeing student loans. As of April 2025, the U.S. Department of Education (DOE) notes that 42.7 million Americans had a cumulative $1.6 trillion in federal student loans outstanding. However, the collection of federal student loan repayments was halted during the early stages of the COVID-19 pandemic (March 2020) and was simply never lifted. According to the DOE, more than 5 million borrowers haven't made a payment in 360 days, and another 4 million are between 91 and 180 days late on their monthly payments. While higher education student loans may sound like something that affects relatively younger Americans, they've become a prominent issue for retirees. Whereas the aggregate number of student loan borrowers under the age of 62 has declined by 1% from 2017 to 2023, the number of student loan borrowers aged 62 and above has surged 59% to approximately 2.7 million over the same period, based on data from the Consumer Financial Protection Bureau (CFPB). Per the CFPB, an estimated 452,000 of these senior borrowers have defaulted on their federal student loans and are likely receiving Social Security benefits. Since President Donald Trump took office in January, his administration has targeted perceived government fraud and is aiming to make federal operations more efficient. One of the many changes under Trump, vis-à-vis the Social Security Administration (SSA), is the reimplementation of Social Security garnishments for delinquent federal student loan borrowers. Beginning "sometime this summer," per Trump's administration, tardy borrowers receiving a Social Security benefit -- this applies to all types of beneficiaries (retired workers, survivors of deceased workers, and workers with disabilities) -- could see their payouts garnished by up to 15%. The one caveat to this garnishment is that recipients must be left with at least a $750 monthly Social Security benefit. Thus, if your normal payout is $825 per month, the maximum garnishment would be $75 per month instead of the flat 15%. Additionally, the Trump administration isn't planning to offer delinquent federal student loan borrowers a 65-day warning prior to potential garnishment, as has been customary in the past. Rather, communications sent out provide just 30 days' notice that garnishments are possible if borrowers are still in default. According to the CFPB, 37% of the Social Security beneficiaries who have a federal student loan outstanding (delinquent or not) currently rely on their monthly check from America's leading retirement program for 90% (or more) of their income. Even a 15% garnishment for defaulted borrowers in this category has the potential to be financially devastating. It goes without saying that the easiest way to avoid this new garnishment by the Trump administration is to not be in default on your federal student loan(s). But for the roughly 452,000 Social Security retirees set to be impacted by this change in policy, there are two under-the-radar yet perfectly legal solutions that should allow a majority to avoid having their payouts garnished. To begin with, some of these defaulted borrowers may qualify for the Total and Permanent Disability (TPD) discharge program, which cancels federal student loans and stops forced collections. As the CFPB pointed out in a January research report, the DOE entered into a data-matching agreement with the SSA in 2021 to automate the TPD eligibility and federal student loan cancellation processes for beneficiaries who become disabled prior to reaching full retirement age (currently age 67 for anyone born in or after 1960). However, this TPD application process is failing Social Security beneficiaries who become permanently disabled after they reach full retirement age. The CFPB notes that the onus of applying for a TPD discharge of their federal student loans and/or garnishment falls onto aged beneficiaries. Census survey data shows that approximately 22% of Social Security recipients with federal student loans report having a permanent disability, per the CFPB's report. Social Security retirees currently in default on their federal student loan(s) can also potentially avoid having their monthly check garnished by applying for a financial hardship with the DOE. Defaulted borrowers will be required to provide documentation of their income and qualifying expenses to the DOE. If an individual's qualifying expenses are larger than their documented income -- especially pertaining to a possible 15% garnishment of their Social Security payout -- the DOE will likely grant a financial hardship exemption. Based on data from the Federal Reserve Board's Survey of Household Economics and Decisionmaking, the CFPB estimates that a whopping 82% of Social Security beneficiaries currently in default on their federal student loans would qualify for the hardship exemption -- in other words, their qualified expenses would exceed their documented income. Yet, a 2015 Government Accountability Office report found that fewer than 10% of Social Security recipients with forced federal student loan collections applied for a hardship exemption. If delinquent borrowers were to simply apply for this financial hardship with the DOE, a majority would likely be granted it. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. A New Social Security Garnishment Is Set to Begin This Summer -- but There Are 2 Legal Ways Most Retirees Can Avoid It was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
USA Today
7 hours ago
- USA Today
Should you claim Social Security at 62 or 70? The answer may surprise you
Should you claim Social Security at 62 or 70? The answer may surprise you The decision on when to claim Social Security is complex and personal. What's the ideal age for claiming Social Security retirement benefits? It depends on who you ask. The earlier you start, the smaller your checks. But, you'll collect these payments for more time. That's the trade-off. But what exactly are your options, and how much of a difference can claiming later rather than earlier make? The answer might surprise you. Claiming Social Security early vs. waiting Social Security offers taxpayers a respectably wide range of payment options. Eligible individuals can claim as early as the age of 62, but can also wait until they turn 70. Or, they can file at any point in time in between. Each of these choices, however, results in a different monthly payment. And the disparity between these payments can be stark. The table below puts things in perspective, comparing the difference in payment size for each age of this nine-year range relative to this year's average Social Security retirement benefit of $1,976 per month. Notice that while there's a progressive reduction in benefits the earlier you claim, there's also an ever-growing benefit for delaying the initiation of benefits beyond your full retirement age (or FRA). This additional benefit, however, stops growing once you turn 70. You're reading that right. For the average beneficiary right now, the difference between claiming when you're 62 versus claiming at the age of 70 is over $1,000 per month. That's no small amount for most households. And the bigger your payment, the bigger the potential difference. Things to consider about taking Social Security The comparisons are clear -- there's an obvious and meaningful mathematical upside in waiting as long as possible to file for Social Security's retirement benefits. Except these numbers alone don't necessarily tell the entire story for every individual and their unique situation. It's possible there's a very good reason to claim Social Security benefits as early as you possibly can, like health-related matters. You may also have enough money saved up to tap later in your life (like an IRA) to allow you to begin collecting some income before you otherwise might. More: 3 ways to increase your Social Security benefit today There's another often overlooked upside to claiming at 62 years of age, however, even if you don't need this money yet because you're still gainfully employed. That is, you might be able to do something more financially productive with these cash payments than the Social Security Administration is doing for you on your behalf. Although the figure's not etched in stone, the average internal rate of return on money withdrawn from your paycheck and forked over to Social Security has been in the ballpark of 4%, after inflation. Sometimes it's more. Other times it's less. Any given year's effective return on this "investment," however, mirrors the average yields on longer-term U.S. Treasury Bonds at the time. Right now that's between 4% and 5%. If you can take these payments and do something more constructive with the money, it makes sense to do so. But won't collecting Social Security while you're also working possibly reduce your Social Security payment? If you're below your full retirement age, yes, it can. Specifically, any work-based wages beyond $23,500 you earn this year will start to shrink any Social Security payments you're already collecting. If you're going to earn enough at your job in 2025, in fact, it's possible you could erase all of your current Social Security benefits payments. You're not actually losing money if this ends up being the case, however. These reductions are ultimately credited toward future Social Security payments, which are no longer reduced by work-based income once you're past your full retirement age. (There's also a very specific income threshold that applies only in the year in which you reach your full retirement age, although that's best left to another discussion.) In many regards this option allows you to have your cake and eat it, too. For most people though, just know that plans to invest their early Social Security payments rarely pan out as initially intended. Successfully implementing such a plan requires a great deal of discipline. Just think about it very carefully Bottom line? There's no one-size-fits-all answer as to when you should claim your Social Security retirement benefits. You'll want to think carefully about your particular situation, including making some predictions as to what it will look like in the future. Broadly speaking though, it rarely hurts to wait just a little while longer to claim, if only to make sure that plan is going to work for you, or to beef up your numbers just a little bit more. And you will most definitely want to make sure it works for you before making the decision. The Social Security Administration will allow people who have claimed at or after reaching full retirement age to suspend these payments if they've only been collecting for 12 or fewer months. Anyone initiating these benefits before reaching their full retirement age, however, is permanently locked into their reduced payments. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $23,760 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets"could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. JoinStock Advisorto learn more about these strategies. View the "Social Security secrets" »
Business Insider
8 hours ago
- Business Insider
AT&T says conducting investigation into claims leaked data is for sale
After Hackread reported that the previous leaked data of 88M AT& T customers now includes both date of birth and Social Security numbers, an AT&T spokesperson said in a statement: 'It is not uncommon for cybercriminals to re-package previously disclosed data for financial gain. We just learned about claims that AT&T data is being made available for sale on dark web forums, and we are conducting a full investigation.' Confident Investing Starts Here:
