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How the Hold Harmless Rule Really Works — and Who Is NOT Protected by It

Nearly every year, two things increase: Your Social Security benefit, and your Medicare Part B premium. 

So what happens if your Medicare premiums increase by more than how much your Social Security benefit increases? And can you actually see a decline in your monthly Social Security benefits? 

Unfortunately, the answer is yes… if you’re not covered by the Medicare Hold Harmless provision. 

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Can Social Security Be Garnished?

Social Security Garnishment Notice

“We need to get an immediate payment or we’ll garnish your Social Security benefit!”

The voicemail left for my client couldn’t have been more clear. After his wife died, he was left with thousands of dollars in medical bills. He’d tried to sort it all out, but trying to process his wife’s death and a mountain of medical bills at the same time was overwhelming. He planned to get to it, but for now, he just needed a minute to grieve.

The bill collectors didn’t wait, and it didn’t take long for the nasty calls to come rolling in. His last straw was the voicemail with the threat of taking away his Social Security benefit. I still remember the frustration, fear and anger in his voice when he asked me, “Can Social Security be garnished by debt collectors?”

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Your Social Security Benefit Isn’t Always Based On 35 Years of Work History

Have you ever wondered how the Social Security Administration calculates your benefits? We have countless resources on this site that explain the various formulas, rules, and exceptions if you’re curious.

But we haven’t discussed one big exception to the main calculation for arriving at your Social Security income amount, and that is the fact that the Administration doesn’t always use all of your years of historical earnings to figure your benefit.

Instead, they only use the years designated as “computation years,” This refers to the number of earnings years used to calculate your Social Security benefit… and it’s why even if you’ve worked for at least 35 years, not all of those years may be included in the average. 

Using 35 Years of Work History Is a General Rule… But It’s Not Always Used to Figure Your Social Security Benefits

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Social Security’s “Never Beneficiaries”

social security never beneficiary

There have been some pretty scary headlines in the news lately about certain people who will never receive a Social Security benefit… even if they paid Social Security taxes throughout their working lives. 

On the face of it, this sounds crazy! I can certainly understand why this would cause concern, especially if you think you might be one of those people.

You pay Social Security taxes while you’re working in exchange for the implied promise of receiving a benefit when you retire. No one wants to be the one who pays into the system but doesn’t receive any income from it when it’s their turn to receive income from the program.

But according to the Social Security Administration, there are more than 1.6 million people who pay into Social Security, but never receive a benefit in return. This represents 3% of the population between the ages of 60 and 89.

What’s going on here?

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The Right Age to Collect Social Security: 10 Factors You Should Consider

the right age to file for social security

It’s one of the most popular questions asked about claiming benefits for your retirement: What’s the right age to collect Social Security? Should you file early — or late?

This is not an easy decision to make, or one to take lightly.  No matter what your financial situation, you’ve likely wondered about the best strategy for you.

So today, take a look at the 10 factors you need to consider when you’re thinking about filing for your benefits.

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The Social Security COLA: How Your Adjustment Is Calculated and Applied

If you are older than 62,   you’ve probably noticed that in most years your Social Security benefits are increased with a cost of living adjustment. 

The cost-of-living adjustment, or Social Security COLA, increases your monthly benefit amount to help your income keep up with inflation. Without the COLA added to your payments, the purchasing power of your benefit would erode as the prices of the things you routinely buy increased over time. 

The annual Social Security COLA amount is normally announced in mid-October. Many people anxiously await the announcement to see how much (if any) that their benefit amount will increase in the coming year. 

If you await the announcement but feel like the process of coming up with each year’s COLA feels mysterious, I want to cover how the Social Security administration calculates these annual cost-of-living adjustments and then applies them to your benefit. 

That way, not only will you know how to look at the data for yourself and avoid a surprise when the announcement comes out, but you’ll also have a better grasp on what the increase means in terms of dollars to your benefit. 

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What Is SSI?

SSI is a federal needs-based program that provides monthly payments to those who are disabled, elderly or blind and have a low income.

SSI is an acronym for Supplemental Security Income.

SSI is not a Social Security benefit. This is often confused since the SSI program is administered by the Social Security Administration. The SSI program is funded by general tax revenues that are paid in through federal income taxes. Social Security benefits are funded through payroll taxes and are not tied to a means test.

To receive SSI you must be:

  • Age 65 or older
  • Blind
  • Disabled

To qualify for SSI you must have income below certain levels and resources (things you own) under certain levels.

Generally speaking, your income must be below the Federal Benefit Rate (FBR) which is set at $783 for single individuals and $1,175 for married individuals. The income requirements can be a little tricky since not all income is counted.

Your resource limit is $2,000 for singles or $3,000 for couples. Like the income limit, there are resources that are not counted.

Here are a few links from the SSA that will help you learn more about SSI.

https://www.ssa.gov/pubs/EN-05-11000.pdf

https://www.ssa.gov/benefits/ssi/

https://www.ssa.gov/pubs/EN-05-11000.pdf

https://www.ssa.gov/oact/cola/SSI.html

What Is My Full Retirement Age

67 is the full retirement age for individuals born in 1960 or later.

If you were born before 1960, your full retirement age may be slightly different.

  • For those born between 1943 and 1954, the full retirement age is 66.
  • For those born in 1955, the full retirement age is 66 and 2 months.
  • For those born in 1956, the full retirement age is 66 and 4 months.
  • For those born in 1957, the full retirement age is 66 and 6 months.
  • For those born in 1958, the full retirement age is 66 and 8 months.
  • For those born in 1959, the full retirement age is 66 and 10 months.
  • For those born in 1960 or later, the full retirement age is 67.

What is my full retirement age date range? 

In the past, full retirement age would always coincide with a birthday. But as the full retirement age has gradually changed, many individuals have wondered about their actual date of full retirement age attainment. 

Here’s the short summary:

  • Full retirement age 1955 birth year – Reach FRA from 3/2/2021 through 3/1/2022
  • Full retirement age 1956 birth year – Reach FRA from 5/2/2022 through 5/1/2023
  • Full retirement age 1957 birth year – Reach FRA from 7/2/2023 through 7/1/2024
  • Full retirement age 1958 birth year – Reach FRA from 9/2/2024 through 9/1/2025
  • Full retirement age 1959 birth year – Reach FRA from 11/2/2025 through 11/1/2026
  • Full retirement age 1960 birth year – Reach FRA from 1/2/2027 through 1/1/2028

full retirement age chart for social security

Knowing when you reach full retirement age is critical to understanding how your benefit will be reduced or increased for filing early or later. This is because your benefit is increased (for filing after full retirement age) or decreased (for filing before full retirement age) on a monthly basis.

Chart showing how social security benefits are adjusted for filing age

When considering the right age to file for your own Social Security, you should consider the 10 factors that must be a part of this decision. Check out my article How To Determine the Right Age to Collect Social Security.