Retirement Social Security

5 Critical Tips for Avoiding Social Security Overpayments

Following this advice might help keep your retirement plan on track and reduce financial stress.

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Updated Sept. 24, 2024
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While receiving more Social Security benefits than expected might seem like a stroke of good luck, it can quickly become a financial headache.

The Social Security Administration (SSA) sometimes pays you more than it should. This can actually disrupt your retirement plan, creating stress when you have to pay back the excess funds.

To protect yourself, it's essential to understand how overpayments happen and how you can prevent them.

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What is a Social Security overpayment?

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A Social Security overpayment occurs when the SSA pays you more than you are entitled to receive. This can happen with retirement, disability, or Supplemental Security Income (SSI) benefits.

When the SSA identifies an overpayment, it will notify you by mail and typically request repayment of the extra funds. Overpayments can create financial stress, so it's crucial to understand how to prevent them.

Why does Social Security sometimes overpay?

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There are several reasons why Social Security may overpay benefits. Common causes include failure to report that you have returned to work after collecting disability benefits or life events such as a marriage or divorce.

Sometimes, overpayments can occur due to administrative errors, such as miscalculating the earnings used to determine your benefit amount. Regardless of the cause, these overpayments can disrupt your retirement plan and lead to the need for repayment.

How to prevent Social Security overpayments

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The best way to avoid the complications of a Social Security overpayment is by taking proactive steps to prevent it from happening in the first place.

Here are five tips to help you avoid overpayments and maintain financial stability during retirement.

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Accurately report wages

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One of the most common causes of overpayments is failure to report wages accurately. You must report your earnings promptly and accurately if you’re still working while receiving benefits.

For example, the SSA uses your reported wages to determine your eligibility for Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI).

Any discrepancies can lead to overpayments. To avoid errors, keep thorough records of your earnings and report any changes immediately.

Check your earnings history

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Another important step is regularly checking your earnings history with the SSA. Your Social Security benefits are based on your lifetime earnings, so any mistakes in your earnings record can affect your benefit amount.

To check your earnings history, sign up for an account with the SSA. By reviewing your earnings history annually, you can catch and correct any errors before they lead to overpayments.

Know whether you are in a non-covered pension plan

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Some public sector workers don’t have Social Security taxes withheld from their paychecks. Instead, they pay into a non-covered pension plan.

Under a non-covered pension plan, you are paying into a pension plan run by a state or local government rather than Social Security. This is common in some professions, such as teachers or firefighters.

It's crucial to understand whether you are in one of these plans because it could impact your Social Security benefits. Failing to report this information can result in overpayments, as the SSA may not have an accurate picture of your earnings.

Report life changes

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Life changes — such as a new disability or returning to work after being away from the job — can significantly impact your Social Security benefits.

If you receive disability benefits, you must report any changes in your health or work status to the SSA. Similarly, if you return to work after retiring, your earnings could affect your Social Security payments.

Keeping the SSA informed of these changes will help prevent overpayments.

Make sure you still qualify for SSI

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If you have a very low income and are receiving SSI, make sure you continue to meet the eligibility requirements. SSI eligibility is based on income and resources, so any changes in your financial situation can affect your benefits.

Failing to report these changes can lead to overpayments.

What should you do if you find out you have been overpaid?

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If you discover that you've been overpaid by Social Security, it’s important to take action quickly. The SSA will notify you of the overpayment by mail and provide instructions on how to repay the excess funds.

You can request a waiver if the overpayment wasn’t your fault and paying it back would cause financial hardship. Alternatively, you can set up a payment plan with the SSA to repay the amount over time.

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Bottom line

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Social Security overpayments can disrupt your retirement plan and create unnecessary stress. You can avoid these pitfalls and maintain financial stability by proactively managing your benefits and accurately reporting earnings.

If your retirement income is too low, look for ways to supplement your Social Security, such as taking a part-time job or starting a side hustle.

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