Did you know you could re-apply for Social Security at 70?
I just found out about a new “wrinkle” in the Social Security system. It allows you to start taking your Social Security benefits at age 62. Then, at any point before you reach age 70, you can stop taking Social Security, pay back the benefits you have already received, and begin taking the higher retirement benefit at 70, unreduced by any other income.
Here is what the National Center for Policy Analysis says:
A Social Security provision allows retirees to reapply for their benefits. Form 521 (Request for Withdrawal of Application) as well as IRS provisions permit an individual to:
* Repay the Social Security retirement benefits received with no interest charged;
* Claim an income tax credit for past Social Security benefit taxes paid; or
* Deduct the amount of the benefits that have been taxed from taxable income (if itemizing).
(The deduction is useful for individuals subject to the Social Security benefits tax, which requires middle- and high-income seniors to include some of their Social Security benefits in taxable income.) Once you repay what you owe, you can immediately reapply for higher benefits. Along the way you will have benefited from an interest-free loan!
The actual present value of receiving benefits at age 62 is the same as at age 70, but this option might increase the value of your benefits, assuming you have the money to make the repayment. And the higher Social Security income at age 70 might be enough to make you more comfortable, pay for increasing medical expenses, and buy a few more books (always my first option).
I’m going to keep this in my “back pocket” for a future date. What do you think of this idea?
2 Comments
It is possible to withdraw an application and re-apply at age 70 provided you are able to pay back in one lump-sum all of the payments received plus all deductions including Medicare premiums. There are 3 possible downsides to this strategy:
1. You may have financial reversals that prevent you from being able to repay all the benefits,
2. If you die before you are able to withdraw your claim for reduced benefits, your widow or widower will find that their benefits as a survivor will also be permanently reduced and
3. If your spouse also received benefits based on your withdrawn claim, they must consent to the withdrawal and repay all benefits paid to them.
For married couples, sometimes it is best for one to apply at their FRA (full retirement age) and request that benefits be suspended until age 70 to get the maximum benefits. This still allows the other to get spouse’s benefits assuming they are of retirement age.
Thanks very much for the comment, Diane. Maybe it’s a good time to revisit this subject.