I have received several questions from advisers recently asking for help with clients who claimed Social Security benefits early — sometimes without telling them. Several advisers asked if there was a way to rectify a client's hasty claiming decision.
“I had always thought that if you took your benefits before full retirement age that you were stuck with the lower amount,” wrote Miranda, an adviser in Cleveland. “But after reading your article on how to supersize Social Security benefits, I was very surprised by this resetting option,” she added. “Could you point me in the right direction on where I can find more information on this strategy?”
Yes, there are two ways for Social Security beneficiaries to increase their benefits after initially claiming them.
One option involves repaying benefits that have already been received. This is officially called a “withdrawal” of benefits and requires filing the Social Security Administration's Form 521. But it can only be done within 12 months of first claiming benefits.
When you withdraw your application and repay your benefits, it effectively wipes the slate clean. You can file a new claim for benefits at a later date, which will result in higher benefits based on your age at the time of the new application.
Waiting until your full retirement age or later to file your new benefits claim would allow you to engage in creative claiming strategies such as “file and suspend” or “filing a restricted claim for spousal benefits.”
However, withdrawing a claim for Social Security benefits may have other implications. For example, if your spouse is collecting benefits on your earnings record, you'll have to repay those spousal benefits, too.
The second option involves suspending benefits. If you have reached
full retirement age but are not yet 70, you can ask SSA to suspend your retirement benefits beginning with the month after the month you submit your request. SSA pays benefits the month after they are due. So if you contact SSA in January and request that they suspend your benefits, you will still receive your January benefit in February. The suspension would begin after that.
Although your Social Security benefits will stop during the suspension period, they will earn delayed retirement credits worth 8% per year for each year you postpone benefits between your full retirement age and 70.
Say you started collecting reduced benefits at age 62. If your full retirement age is 66 and you collected benefits four years early, you would receive 75% of your primary insurance amount compared to 100% if you had waited until 66 to collect.
If you later regret your early claiming decision, you can suspend your benefit once you reach age 66. During the years between 66 and 70, your benefit will increase by 32%, thanks to four years' worth of delayed retirement credits.
This move effectively restores your benefit to what it would have been if you had waited until your full retirement age to collect (75% x 1.32% = 99%). A larger retirement benefits also translates into a potentially larger benefit for the surviving spouse.
A final note of caution to any Medicare beneficiaries who plan to either withdraw or suspend their Social Security benefits: Once your benefits stop, you will be responsible for paying your monthly Medicare Part B premiums that normally are deducted directly from your Social Security benefits.
You can read more about both reset options
here.
