You Could Still Lose Half Your Benefits: Social Security Reduces Overpayment Withholding Rate, Experts Warn Of Fallout

A recent shift in how the Social Security Administration handles benefit overpayments may offer partial relief — but it still comes with serious consequences. Effective April 25, the SSA began withholding up to 50% of monthly Title II benefits, such as retirement, disability, or survivor payments, from those who received overpayments. 

While that's a step back from the previously announced 100% clawback, experts say the new policy can still leave retirees and other beneficiaries in financial distress.

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Why Are Benefits Being Withheld?

Overpayments happen when the SSA sends out more money than a person is actually owed. This can occur for several reasons, including agency errors or delays in processing information — like changes to a beneficiary's income, living situation, or marital status.

When the SSA determines that an overpayment has occurred, it sends a notice asking for full and immediate repayment. If the beneficiary doesn't respond within roughly 90 days — by requesting a waiver, a reconsideration, or a lower repayment rate — the SSA begins automatically withholding funds.

According to an emergency message from the SSA, the new policy sets a default withholding rate of 50% for all new overpayment notices beginning April 25. This means half of a beneficiary's monthly check may be withheld until the debt is paid off — unless they take action.

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Relief from 100%, But Still Not Easy

The SSA's decision follows backlash against a previous plan to withhold 100% of benefits for overpaid recipients. That plan, announced earlier this year, would have left some individuals without any income at all. Critics, including advocacy organizations and lawmakers, called the full clawback "draconian."

While the reduced rate is seen as progress, it's far from a full solution.

"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," Kate Lang, director of federal income security at Justice in Aging, told CNBC.

Richard Fiesta, executive director of the Alliance for Retired Americans, told CNBC the change still risks causing "immediate economic hardship" for many, particularly when the overpayment was not the beneficiary's fault.

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Can You Dispute the Overpayment?

Yes — but it's not always straightforward. Beneficiaries can request a reconsideration, a waiver, or a lower withholding rate. However, responses can vary depending on the SSA employee handling the case.

"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." 

Plus, long wait times for SSA appointments can make it harder for people to respond in time.

What to Do If You Receive an Overpayment Notice

If you get a notice, act quickly. According to the SSA, you typically have about 90 days to challenge it before the SSA begins withholding up to 50% of your monthly benefit.

Experts recommend contacting the SSA as soon as possible to explore your options. You may be able to reduce the withholding rate or avoid repayment altogether if you weren't at fault for the overpayment.

Bottom Line

While the SSA's decision to cut the withholding rate from 100% to 50% may sound like good news, the fallout could still be serious for many retirees. Stay informed, respond quickly to any overpayment notice, and don't hesitate to ask for help if you need it.

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