Many people choose to begin recieving their social security benefits at age 62, the earliest age possible. When you do this, you receive a reduced monthly benefit for the rest of your life. This is often a great idea, and I often recommend it to my clients if: 1. They could use the extra income to help them meet retirement expenses. Or 2. They have a family history of not living well beyond life expectancy. By waiting till full retirement age to start receiving your social security benefits, you get more money per month.
In some cases, it makes sense for you to restart social security benefits and thereby increase your monthly income. Doing this requires that you first pay back all of the social security benefits that you’ve received up to that point. Some experts say that doing this can increase your monthly benefits by as much as 76%. Here’s what you have to do to make this happen:
Consult your CPA or Financial Planner
You need to meet with your CPA or personal financial planner to help you make this decision. You will need to run some calculations to see if it makes sense for you to pay back a big chunk of money in exchange for a higher monthly benefit. This monthly benefit will be increased over time with inflation. So that’s a good thing. Also, the government doesn’t charge you interest on the amount you’re paying back, another good thing.
Consider the financial impact
Having to pay back all of your social security benefits all at once could be a huge amount of money. For example: let’s say you started your social security benefits at age 62 and you’re getting $1100 per month. If you’re not 66, you would need to pay back $52,800. Again, you don’t have to pay back any interest on this amount, so it’s like you’ve had an interest free loan from the government.
File the appropriate form
Now you need to file SSA form form 521, “Request for Withdrawal of Application.” Send the form, along with the the check for the full amount of benefits received, to the Social Security Administration. Once the form is processed, you’ll begin receiving the benefits you’re entitled to at your present age. For example, if you were born between 1943 and 1954, your full retirement age is 66. For each month before full retirement you began taking benefits, they are reduced by .75%. If you began benefits at age 62, you receive 75% of your full benefits. For each month you delay benefits beyond full retirement age, they are increased by .75%. If you restart social security at age 70 in this scenario, you receive 132% of your full benefits.
A word of caution
A few things you need to consider, and your personal financial planner should address this with you, is your life expectancy. If your family has a history of people living to or beyond life expectancy, then this strategy might make more sense for you. If you pay back all this money, and then you don’t live long enough to recoup your outlay of cash, then restarting social security was not a good deal. None of us know how long we’re going to live, but your family history should be a pretty good indicator of what is likely to happen with you.
The other consideration related to your health is that you may end up needing that lump sum of money for health care or long-term care needs. The last thing you want to have happen is you increase your income by restarting social security benefits, but then you run out of money early because you tied it up. Make sure you and your financial advisor consider all the options before electing to do this.