Social Security serves as a financial lifeline for millions of retired seniors. Without those benefits, many retirees would no doubt struggle to keep up with their ongoing expenses.
Thankfully, there are few situations that will result in your Social Security benefits being taken away. You do risk having some of your Social Security income withheld if you're collecting benefits prior to reaching full retirement age and are working at the same time. In that case, earnings above a certain threshold could result in withheld benefits that will be paid to you later on.
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But generally speaking, Social Security benefits are protected from creditors. So if you default on a debt and a creditor sues you in court, they generally can't come after your Social Security income.
However, there's an exception to that rule. The U.S. government can take your Social Security benefits away if you fall behind on certain obligations, so it's important to know what those are.
When you're looking at severe consequences
For many seniors, losing out on Social Security income could mean not being able to pay the rent, put food on the table, or keep the lights on. Unfortunately, there are certain situations where the U.S. government can garnish your Social Security benefits.
If you owe the IRS money and you don't make good on your tax debt, the government can take some of your Social Security away. Similarly, if you default on federal student loans, you'll risk having Social Security income withheld. Seeing as how an estimated 3.5 million Americans aged 60 and older hold over $125 billion in student loans, the latter is a distinct possibility.
Avoid losing out on Social Security
While the government can take your Social Security benefits in certain circumstances, there are also ways to avoid that scenario. If you owe money to the IRS and can't pay your tax debt in full, reach out to the agency to get an installment plan. If you keep up with your payments, you'll be considered current, even if you have a huge balance lingering.
Meanwhile, if you're having trouble paying off your federal student loans, contact your loan servicer and explore different repayment-plan options. You may be able to get on a plan with lower monthly payments.
You may also be eligible to defer your loan payments for a period of time to avoid becoming delinquent. Or you may be eligible for student loan forbearance. Often, qualifying for deferment or forbearance will hinge on you experiencing financial hardship. If that's the case, then it's certainly worth a try.
Many seniors rely on Social Security to cover their basic living expenses, so it's a good thing those benefits are generally protected from creditors. But the U.S. government falls into its own special category. So it's important to do what you can to stay current on your student loans and pay the taxes you owe to avoid losing out on a critical retirement income source.
