Choosing when to start receiving your Social Security benefits can be complicated and overwhelming.
Congress has defined full retirement age as a precise age in both years and months based on your birth year. Full retirement age starts at age 65 for those born in 1938, is age 66 for birth years between 1943-1954, and is age 67 for those born in 1960 and later. Between those ranges, it gradually increases by a few months for every birth year.
If you file before your full retirement age, your benefits are reduced by a complicated formula varying by your birth year, up to a 30% reduction in benefits. If you file after your full retirement age, your monthly benefits are increased by delayed retirement credits. Delayed retirement credits are calculated by a different formula based on birth year and most commonly result in a credit of 8% per year that you delay.
You are first eligible for benefits at age 62 and your benefits reach their maximum at age 70.
Whether by increasing your delayed retirement credits or reducing your benefit reduction, each month you delay filing increases the monthly benefit you will receive.
It may be enticing to start receiving Social Security benefits as soon as you are eligible at age 62, but a decision to take reduced early benefits will reduce the benefits you receive for the rest of your life. We often recommend to our clients that they delay taking their benefits until age 70, but everyone’s scenario and needs are different.
If you are still in your 60s, the good news is your decision doesn’t have to be permanent. You actually have two ways in which you can change your benefit amount. You can either withdraw your Social Security application entirely or suspend your benefit payments.
Withdraw Your Application
Withdrawing your application requires quick action on your part. This option is only available if you change your mind within 12 months of starting your benefits. When you withdraw your application, it is like your decision to start taking benefits never happened. This requires you to repay all the benefits you received before withdrawing your application. It is important to note that you can only withdraw your application once during your lifetime. If your spouse is also collecting benefits based on your application, you will both need to agree to the application withdrawal and repay the benefits. Your spouse cannot continue to receive benefits based on your record if you withdraw your application. However, if your spouse is receiving retirement benefits based solely on their own record or is not receiving any benefits yet, your decision to withdraw would not directly affect your spouse.
The benefit of withdrawing your application is that your benefits can continue to grow and are not penalized by those few months you received benefits. For example, let’s say you hastily made the decision to start receiving retirement benefits as soon as you were eligible at age 62. Assuming a primary insurance amount of $1,000 and a birth date of 1960 or later, your benefits would be $700 per month. After 2 months, let’s say you realize you don’t really need the $700 per month at this point in your life and withdraw your application. You repay the Social Security office the $1,400 that you’ve received and stop receiving benefits.
Years later, when you reapply for benefits, it is like you are applying for the first time. If you submit your application at age 70, your benefits would now be $1,240 per month due to the delayed retirement credits you have earned.
To withdraw your Social Security retirement application, you need to fill out Social Security Form SSA-521 and send it to your local Social Security office. If you’re not sure how much you need to repay, the office will let you know once they have approved your request.
Suspend Your Benefits
The other way to change your Social Security benefits is to suspend your benefits. This option is only available between your full retirement age and age 70. However, you can choose this option even if it’s been several years since you started receiving benefits.
When you suspend your benefits, you do not have to repay the benefits you’ve received. Your future benefits are simply stopped until either you restart them or turn age 70. During the time that the benefits are stopped, you earn delayed retirement credits. In this way, when you eventually restart your benefits, your monthly payment will be larger.
Just like when you withdraw your application, your spouse will also be affected by your suspension if they are receiving benefits based on your earnings record. If you spouse is using your earnings record and you decide to suspend your benefits, both of your benefits will be suspended. If your spouse is receiving retirement benefits based solely on their own record or is not receiving any benefits yet, your decision would not directly affect your spouse.
Again for example, let’s say you hastily made the decision to start receiving retirement benefits as soon as you were eligible at age 62. Assuming a primary insurance amount of $1,000 and a birth date of 1960 or later, your benefits would be $700 per month. Now, you are approaching your full retirement age of 67. You decide to suspend your benefits so you can receive larger benefits in the future. You don’t have to repay the $42,000 that you’ve received over the past five years, but you will not get any more benefits until you reapply. When you turn 70, your benefits are automatically restarted, but now they have been increased by those three years of delayed retirement credits of 8% per year. This makes your monthly benefit now $868.
To suspend your benefits, you can simply call your local Social Security office or send them a request in writing.
If your goal is to receive the highest possible Social Security benefit, withdrawing your application is a great tool to correct a regretted Social Security decision. Though the added benefits are less, suspending your benefits may also be a useful tool if you’ve missed the deadline to withdraw your application and want to get a higher monthly benefit in the future.
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