Even if you claim early, these rules could help boost the amount of your monthly check.
Social Security is the cornerstone of many Americans’ retirement plans. 59% of retirees say their monthly benefits check is a major source of income, according to an annual Gallup poll. As such, getting the most out of the program is extremely important for the majority of seniors.
But that’s easier said than done. While all the statistics point to delaying benefits as long as possible in order to maximize your lifetime income from Social Security, very few seniors actually do so. Less than 10% of new Social Security claims went to people age 70 or older in 2022, according to the most recent data available. Meanwhile, the most popular claiming age is 62, the year most people become eligible for retirement benefits.
There are certainly instances in which it makes sense to claim as early as age 62. If you have a health issue shortening your expected lifespan, for example, it may make sense to claim early. Additionally, if you need supplemental income to provide for your basic needs, it can make sense to claim early. But most people will be better off waiting to claim their benefits.
The good news is that there are two little-known rules that can help you maximize your retirement benefits, even if you’ve already claimed early. Here’s what you can do.
1. Hit the undo button
If you claim your Social Security benefits early, but your circumstances change or you realize you don’t need the income, you may be able to withdraw your application. As long as you submit your withdrawal request within 12 months of your original benefits approval, you can undo your claim.
It’ll be as if you never applied for benefits in the first place. Your monthly benefit will increase for every month you wait to claim dating back to when you turned 62.
There are a couple of catches, though.
First, you must repay all the money you and your family received from Social Security. That includes Medicare premiums and taxes withheld from your monthly check if you had any.
That may be a challenge for someone who’s already on a tight budget. If the government approves your application withdrawal, but you realize you can’t pay back all that you owe, you have an additional 60 days to cancel the withdrawal.
The second catch is you can only withdraw or cancel your Social Security application once per lifetime. The Social Security Administration doesn’t want you using the program for short-term loans. If you apply for benefits again before reaching full retirement age, you’re stuck with your decision.
If you’ve passed the deadline to withdraw your application, you’re unable to pay back the money you’ve received, or you’ve already made a second claim, you’re not totally out of luck. You can still increase your monthly benefit with another important Social Security rule.
2. Hit the pause button
The second rule isn’t nearly as powerful as the ability to withdraw your application, but it’s much more accessible. You can suspend your benefits upon reaching your full retirement age.
Your full retirement age will fall between ages 66 and 67 depending on the year you were born. Those born from 1943 to 1954 have a full retirement age of 66. The full retirement age increases by 2 months for every year you were born after 1954 before maxing out at age 67 for those born in 1960 or later.
When you suspend your benefit, you stop receiving a monthly check in the mail. In exchange, the Social Security Administration will add a little bit to your future checks. You’ll see your monthly benefit rise by 2/3 of a percentage point for each month your benefits remain suspended, up until age 70. So someone with a full retirement age of 67 could boost their benefits by up to 24%. Your benefits checks will resume automatically at age 70 if you haven’t resumed them already.
Again, there are some pitfalls to watch out for.
First, anyone (except for an ex-spouse) collecting benefits on your record will now be ineligible to receive those same benefits. So if you have a spouse or child collecting Social Security based on you also collecting benefits, it could hamper your total income. In most cases, it works out in the long run to delay the higher-earning spouse’s benefit.
The second pitfall is that you’ll now have to pay for Medicare premiums out of pocket. The Social Security Administration will automatically enroll beneficiaries in Medicare and withhold the premiums from monthly checks. But without a monthly check, there’s no money to withhold. You’ll have to pay directly. Medicare Part B premiums start at $174.70 per month and go up based on income.
As long as you plan for those pitfalls, suspending your benefits upon reaching full retirement age can be a smart move to boost your Social Security income.
