Did you file for Social Security before full retirement age and now think you made a mistake?
If that’s the case, don’t despair.
For those who find themselves wishing that they did not take benefits early, there may be options to rectify the situation, says Brian Vosberg, a certified financial planner with Vosberg & Associates and author of The Complete Retiree’s Guide to Social Security: Powerful Strategies to Maximize Retirement Benefits.
First, determine how long it has been since you started collecting benefits. If it has been less than 12 months, you can withdraw your application for benefits, Vosberg says. “If you do this, you have to pay back the benefits that you received and it’s like you never turned on your benefit,” he says.
Pay back Social Security benefits
During this COVID-19 financial crisis, Vosberg says the “withdraw application” option might be a viable income solution. “Think of it as a bridge loan,” he says. “With many people out of work without income, turning on your Social Security might be an option.”
And if you’re able to regain employment in the next 12 months, you can withdraw your Social Security application. “If you are not able to find employment you can stay collecting your Social Security, essentially stay retired,” he says.
Experts caution, however, that withdrawing your claim is potent medicine, and should be used with care — especially since you can do it only once. “It’s a big deal and must be requested in writing,” says Andy Landis, author of “Social Security: The Inside Story.” “After withdrawal, it’s like you never even filed the claim. That’s why you have to repay any benefits.”
Another caution: You must repay any payments received. Plus, any family members on your record also must repay. “That goes for your ex-spouse, too, so there may be negotiation involved,” Landis says. “And you can use withdrawal only once in your lifetime.”
If you plan to withdraw, Landis recommends making it clear to the Social Security Administration that you “withdraw” the claim, not just suspend payments.
Voluntary suspension
If you have at least reached full retirement age, you can suspend your benefits, Vosberg says.
“I have had clients that have taken Social Security early and have later changed their minds or not needed the income,” he says. “If you are not able to withdraw your benefit – because you have been collecting longer than 12 months – then I would consider suspending benefits once you reach full retirement age.”
Doing so, he says, will allow for your Social Security benefit to earn delayed credits of 8% per year until you reach age 70.
You can request the voluntary suspension by phone, and you don’t have to repay suspended benefits, Landis says.
One caution: When you suspend, all family benefits also stop, says Landis.
And one exception: Ex-spouse benefits are not affected.
Return to work
If you can’t withdraw your application because you’re outside the 12-month window and you’re between the ages of 62 and full retirement age, there’s yet another way to fix your mistake.
If able, go back to work. Now Social Security will withhold benefits if your earnings exceed a certain level, called a retirement earnings test exempt amount, and if you are under your full retirement age. For 2020, Social Security will withhold $1 in benefits for every $2 of earnings in excess of $18,240. And for those attaining full retirement age in 2020, the annual exempt amount is $48,600.
So, depending on how much you earn, Social Security will adjust the reduction on your benefits for each month you don’t receive a check due to the earnings test.
William Reichenstein, director of research at Social Security Solutions and co-author of “Social Security Strategies: How to Optimize Retirement Benefits,” gave this example:
Consider a single woman who must begin Social Security benefits today at age 62 because of a lost job. Let’s say she gets a job again in January. If she earns at least a modest income, she will lose, because of the earnings test, all Social Security benefits for January 2021 through December 2023. She turns full retirement age in 2024 and, due to a separate earnings test that applies in the year someone attains full retirement age, she may not lose any Social Security benefits for that year. At her full retirement age, the Social Security Administration would then increase her monthly benefit to reflect all months in which she lost full or partial benefits.
“In this case, her benefits would increase to a level as if she began her Social Security benefits 36 months after the date she actually began her benefits,” said Reichenstein. “That is, her benefit is adjusted for the 36 months of lost benefits from January 2021 through December 2023.”
In short, due to one, the earnings tests that apply before she attains full retirement age and two, the ability to suspend benefits at full retirement age and then restart these benefits at age 70, she can undue most of the damage done by starting her benefits early.
