Social Security benefits can be garnished depending on the type of payments and debt you owe. These deductions are usually carried out for financial liabilities such as back taxes, student loans, child support payments and more. But there are limitations on how much a creditor can take.
How Garnishing Works
Through garnishing, government agencies, employers and creditors can deduct percentages of your Social Security benefits for unpaid debts. For instance, under the Consumer Credit Protection Act, an employer can withhold an employee’s earnings for child support payments, as long as a court order has been issued.
Court orders don’t always precede benefit garnishments, though. In fact, the IRS can garnish your benefits without a court order. But the legal practice of garnishing also comes with regulations. We explore those below.
Child support or Alimony
You’ll be subject to garnishment of up to 50% of your Social Security benefits if you’re supporting a spouse or child other than the one specified in the court order. If you aren’t supporting another spouse or child, up to 60% of your after-tax income can be garnished. Up to 65% of your earnings will be garnished if you’re more than 12 weeks in arrears.
If you’re more than 12 weeks behind, and you’re supporting another child or spouse, you’ll be subject to a garnishment of up to 55% of your earnings.
You’ll run into a garnishment rate of 15% if you default on your student loan payments. But there is a rule that protects your monthly benefits. Specifically, the government can’t leave you with less than $750 per month in benefits.
For instance, if you were receiving a monthly benefit of $800 and you missed a few student loan payments, you’d be subject to a garnishment fee of $120. You wouldn’t have to pay the entire fee since a $120 payment would leave you with less than $750 a month. Instead, the government would just take $70.
Federal income taxes
The 15% garnishment rate also applies to federal income taxes. If you’re in arrears, you’ll typically have to pay 15% of your Social Security benefits.
Your Social Security benefits could be garnished for several reasons. They might be garnished for defaulted student loans, child support or alimony payments or back taxes. Nonetheless, the government doesn’t have complete control over your benefits, since most garnishments have rate limitations. Therefore, it’s wise to do your research so you aren’t blindsided by any Social Security benefit reductions.
Retirement Planning Tips for Beginners
- Understanding your Social Security benefits is a crucial part of retirement planning. As you approach you golden years, it’s helpful to determine just how much you’ll earn in government-issued retirement funds. Our Social Security calculator can help.
- Finding a financial advisor doesn’t have to be hard. SmartAsset’s financial advisor matching tool connects you with three local advisors for free.
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