Most people don’t have second thoughts about their decision to claim their Social Security benefits.
Ninety percent of Americans, according to a report by the Center for Retirement Research at Boston College, begin collecting their Social Security retirement benefits at or before their full retirement age.
The most popular start date for Social Security is 62, which is the earliest age possible. Among women, 48% start their Social Security checks at that age versus 42% of men.
While the vast majority of people are happy with their decision regarding the timing of their Social Security benefits, some people regret what they’ve done.
The good news is that for some Social Security recipients it is possible to undo this pivotal decision.
A big reason to reconsider taking benefits is because the later you wait to tap into Social Security, the bigger the checks are. If you start taking benefits at age 62, your monthly benefits are reduced by about 30 percent. Wait until age 64, the benefits are reduced by 20 percent and at 65, the benefits are reduced by 13.3 percent.
For every year that benefits are delayed, an individual earns an eight percent delayed retirement credit.
What follows are two ways to undo a Social Security claiming decision:
An individual who changes his mind about Social Security benefits can stop the payments if it is done within 12 months after the benefits started.
If you withdraw your application for retirement benefits, you must pay back all the prior benefits based on the earnings record. In addition, you would have to repay any spousal or children’s benefits that are based on your Social Security. You would need the written permission of anyone receiving benefits based on your earnings record.
An exception to the repayment rule is if the individual is divorced. Specifically, an individual would not have to repay benefits of an ex-spouse if the divorce occurred at least two years prior.
To withdraw a claim for retirement benefits, you must complete Form SSA-521.
You can learn more about this Social Security strategy by reading Retirement Planner: If You Change Your Mind.
One reason why someone would reconsider the timing of his benefits is because he didn’t realize that delaying Social Security would generate larger checks in the future. Or she might have begun taking Social Security after retiring, but has now rejoined the workforce.
When this person reapplies for Social Security in the future, his or her benefits will be calculated based on that current date and not what happened in the past.
For a Social Security recipient who started receiving benefits before full retirement age and, more than 12 months have passed since the first check, a second suspension strategy is available.
Once the recipient reaches full retirement age, she can voluntarily suspend benefits. Freezing your benefits does not require repaying your checks or any spousal benefits.
Until recently, someone could suspend payments without impacting a spouse receiving benefits, but the Congressional Budget Act of 2015 put an end to that option.
Ideally, your decision of when and how to elect receiving benefits should be made in the context of your overall financial picture. The rules regarding social security benefits are complex and the decisions of how and when to receive benefits is not the same for everyone. Therefore, consult your financial advisor to ensure you make the best decision for you and your family and avoid having any of those second thoughts.
For 25 years, Dowling & Yahnke has provided clients with comprehensive investment management and financial planning advice including social security claiming strategies.