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Social Security Re-Do

January 17, 2020

Some of you may have been watching our posts and thought “Oh no, I may have made a mistake when I claimed Social Security”.  Is there anything you can do?

Let’s go to the rule book. You can reverse a Social Security decision with two important caveats:

  1. You must submit the request within 12 months of the first month of your entitlement
  2. You can only reverse a decision once in your lifetime

There you have it, and it’s just that easy; not really. When you reverse your decision using form SSA-521 you have to send back all payments you have received AS WELL AS all payments that had been received by those collecting on your number, such as spousal benefits and dependent benefits.

But if you go through this process Social Security will act like you never visited them, and you can go back at some point in the future and collect benefits as if nothing happened. We see this most often when somebody retires from their career job and decide to collect Social Security early. Then shortly after retiring they receive an offer they can’t refuse to return to work or maybe do some consulting. If they didn’t have this one-time redo they’d be stuck with that permanently reduced number and may not actually receive checks because their income is way beyond the earnings limit (if you collect benefits prior to your Full Retirement Age and have wages or self-employment net income your checks may be reduced).

There’s one other opportunity you may have to adjust your Social Security. First know that NOBODY can suspend a benefit prior to Full Retirement Age. Suspend meaning you can’t just go to Social Security and say “stop my benefits for a while and I’ll get back to you when I’d like to start collecting again”, prior to FRA. The scenario I just outlined about reversing your benefit decision is considered a withdrawal of benefits, not a suspension. HOWEVER, once you reach FRA you can suspend your benefits and just put them on hold for a while. Why would somebody do this????

Let’s say you started collecting at age 62 because you hadn’t received great guidance on how the system works. Several years have gone by and you realize you don’t really NEED Social Security in your retirement situation, but you’re beyond the 12 month reversal window, and you’re thinking “I wish I would have waited and been getting higher benefits for the rest of my life”. Now, you’re at your FRA. At this point you can suspend your benefits AND you will start to collect the 8% annual delayed retirement credits that are enjoyed by those who hold off claiming benefits until after FRA. The base for the 8% credits will be the reduced amount you had been receiving, not on your original full retirement amount, but this could end up to be a significant boost in benefits. Then maybe you go back in at 70 and restart benefits at a higher amount!

Be cautious though, if you have a spouse or children who are collecting on your number their benefit will stop also. Any time benefits are suspended, all benefits (except for a divorced spouse – more on that in another post) attached to the benefit that was suspended will be suspended also.

Know the rules so you can avoid the pitfalls in claiming your Social Security and use some of those rules to your advantage.

Back for more later with your Social Security enthusiasts.