Social Security

A Social Security Do-Over?

By Beth Laurence, J.D., University of California, Hastings College of the Law

In today's economy, with earlier retirement ages coupled with longer life expectancies, many senior citizens are worried they or their spouse will find themselves out of cash in what was supposed to be their golden years. Indeed, some retirees who start collecting their benefits early because they needed the income realize they are losing potential benefits. (When you begin receiving Social Security benefits at age 62, your monthly benefit payment will permanently lower than if you had waited.) For those who change their minds after applying for early retirement benefits—maybe they receive a windfall or they go back to work—Social Security allows a one-time "do-over." The result? Higher benefit payments over the long run.

A Social Security Do-Over

There are several requirements to doing a Social Security do-over—what Social Security calls "withdrawing" your claim. These requirements make the do-over less appealing than it used to be. First, you must make a request to withdraw your claim within 12 months of when you started to collect retirement benefits. (This deadline was imposed in 2010; previously there was no time limit.) Second, you must repay all of the past benefits you've received. Sometimes this can add up to having to repay a lump sum of $20,000 to $25,000. Most people who elected early retirement don't have the entire lump sum available to pay back.

There may also be some unexpected monies you would need to repay. If you were having your Medicare premiums deducted from your Social Security check, you'll need to repay those premiums (unless you decide to withdraw Medicare as well). And if your spouse and children were collecting dependents benefits based on your earnings record, they must pay back these benefits. (For this reason, you must get their agreement in writing before you'll be allowed to withdraw your application.)

Who Should Do This?

For those retirees who received early payments of Social Security and can afford repaying benefits, this do-over can be a great decision. If you're healthy and are expecting to live beyond the average life expectancy, withdrawing your claim can make sense. Or if you're concerned that your collecting early retirement benefits has lowered your spouse's eventual survivor benefit, you may want to reverse your initial decision by filing SSA Form 521 and wait a few years to re-apply for benefits.

However, it's not for everyone. If your health isn't great, this option makes less sense, because you may not be around long enough to recoop the money you'll be paying back. Either way, if you're considering withdrawing your claim and paying back your retirement benefits, consider consulting with a financial planner and tax adviser first.

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