Social Security clawback rules just changed again

The Social Security Administration (SSA) is rolling out significant changes – some of which may leave your head spinning.

One of the most consequential updates? How it handles overpayment clawbacks, the recovery of funds mistakenly paid to beneficiaries.

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While Social Security overpayments are relatively rare, the fear of losing essential income can make even the thought of repayment stressful. Adding to the anxiety: scammers are exploiting this confusion to target unsuspecting retirees.

Social Security has updated its Social Security overpayment recovery rules – again. Learn how the new 50% clawback cap works, how to appeal overpayments, and how to avoid scams.

Photo by Kawê Rodrigues on Unsplash

Until 2024, the SSA could withhold 100% of your Social Security benefit if it determined you were overpaid. That left many retirees with no income while the SSA recouped the overpayment — an approach widely criticized as overly punitive.

In 2024, the agency revised its policy to limit withholding to just 10% of monthly benefits, aiming to reduce the financial burden. But by March, the SSA announced it would revert to full (100%) withholding, a move projected to save the program $7 billion over 10 years, according to the Office of the Chief Actuary.

That reversal met strong pushback.

By April 2025, the SSA revised its approach again, limiting clawbacks to 50% of future benefits until the full overpayment is recovered.

“This is fairer,” said Martha Shedden, a Registered Social Security Analyst and co-founder of the National Association of Registered Social Security Analysts. “Many people rely solely on their Social Security benefits, and to have the entire check disappear was unconscionable.”

By way of background, the estimated average Social Security retirement benefit for January 2025 was $1,976, according to SSA. The maximum monthly Social Security benefit was $3,822 for workers retiring at full retirement age in 2024.

Based on data from the U.S. Census Bureau and Bureau of Labor Statistics, the median household income for individuals aged 65 and older in 2024 is estimated to be around $75,020, or $6,251 per month.

According to SSA, 71.6 million people received benefits from programs administered by the SSA in 2023; 5.8 million people were newly awarded Social Security benefits in 2023; and 55% of adult Social Security beneficiaries in 2023 were women.

There has long been debate over how many seniors rely primarily – or exclusively – on Social Security for income in retirement, as well as how much of their pre-retirement income the program replaces on average.

According to Andrew Biggs, author of The Real Retirement Crisis: Why (Almost) Everything You Know About the U.S. Retirement System Is Wrong, the reality is often misunderstood.

He points out that the number of older Americans who receive all of their income from Social Security is very small, and that the frequently cited figure—that Social Security replaces about 40% of pre-retirement income on average – is outdated and inaccurate.

Biggs notes that the SSA no longer attempts to calculate this average replacement rate. However, in the mid-2000s, the SSA found that fewer than 5% of Americans age 65 and older relied exclusively on Social Security for income.

More recent data backs this up.

A 2017 U.S. Census Bureau study found that only about 12% of seniors received at least 90% of their income from Social Security.

Despite this, some groups continue to claim that as many as 40% of retirees rely solely on Social Security. According to Biggs, those figures are misleading and not supported by rigorous data.

According to J.P. Morgan Asset Management, Social Security replaces about 64% of income for individuals earning $30,000 per year, but only 14% for those earning $300,000 annually.

Replacement Rate Detail By Household Income Chart

J.P. Morgan Asset Management

Mike Piper, creator of Open Social Security, explains that even under the new rules, SSA regulations allow for reduced withholding if full recovery would cause undue financial hardship.

To request a lower repayment rate, file Form SSA-634. To dispute the overpayment itself, use Form SSA-561, the “Request for Reconsideration.”

According to Mike Lynch of Hartford Funds, overpayments are often due to SSA processing errors — not beneficiary fault. Between FY 2015 and 2022, the agency overpaid roughly $72 billion, less than 1% of total benefits paid.

Common overpayment causes:

Failure to report income or work activity
Changes in marital status or living arrangements
Health status changes affecting disability eligibility
Delayed reporting or system miscalculations by SSA

If you receive an overpayment notice:

Repay the full amount online or by mail
Request a payment plan
File an appeal or request a waiver if you cannot afford repayment

You typically have 30 days from the date of the notice to respond. Contact the SSA at 800-772-1213 for help — or better yet, consult a financial or tax adviser to understand your options and implications for your broader financial plan.

Though only about 1% of recipients experience an overpayment, scammers are increasingly targeting retirees by impersonating the SSA.

In 2024 alone, nearly 300,000 government scam attempts were reported, many involving fake Social Security contacts. Be aware: the SSA never does the following:

Threatens arrest or legal action
Demands payment via gift cards, crypto, or wire transfer
Suspends your Social Security number
Direct-messages you on social media
Pressures you into secrecy or urgency

The SSA only contacts beneficiaries through official mail. Always verify before responding – and keep your personal information updated at SSA.gov.

Stay tuned for upcoming articles on other SSA changes, including student loan collection resumption, digital Social Security cards, and improvements to SSA call wait times.