Starting Social Security prematurely is common. Here are 3 ways to fix Social Security mistakes to get back on track.
How To Fix Social Security
Repay Social Security Benefits
If you change your mind within the first 12 months of electing benefits, you can still file a Form SSA-521 to withdraw the application and pay back any benefits.
If a spouse or children received benefits, those benefits would also need to be repaid.
Once benefits have been repaid, you are treated as though you never elected, which means you will not receive an actuarial reduction due to the original filing and can file a restricted application for spousal benefits.
The restricted application is available only to claimants born before Jan. 2, 1954.
Go Back To Work
If you are outside the 12-month window and decide you want to go back to work between the ages of 62 and your full retirement age (FRA), your benefits will be subject to an earnings test.
The 2020 earnings test exempt amount is $18,240 ($48,600 in the year you turn in your FRA).
Social Security will withhold $1 in benefits for every $2 of earnings above that amount.
This is not a tax.
- Let’s say you elected benefits at 62 and receiving a $1,800 monthly benefit (75% of $2,400) and now you want to go back to work at 63 earning $100,000 per year.
- $100,000 minus $18,240 is $81,760.
- Divide that by two and the earning penalty would be $40,880.
- Because that is greater than the total Social Security benefit of $21,600, you would not receive any Social Security for this period.
We want to be very clear that the “earnings penalty” is not a tax because Social Security would adjust the reduction on your benefits for each month in which you didn’t receive a check due to the earnings test.
If you actually received benefits for the 12 months, you were 62 but then worked and did not receive any further benefits until age 66. The Social Security Administration would go back to your record and adjust your benefit upward.
They will treat it as if you had originally elected at 65 instead of 62, so you would then begin receiving a check for $2,240 plus any cost of living adjustments that had accrued.
Suspend Social Security Benefits
There is another option for those who don’t want to go back to work.
Once you reach your FRA, you can voluntarily suspend benefits.
You need to call or visit a Social Security office and request a voluntary suspension.
You can even call in advance of your FRA with instructions to suspend at the FRA.
If requesting a suspension, you will be suspending benefits for anyone currently receiving a benefit off of your record.
By electing at age 62, you basically reduced your monthly benefit to 75% of what you would have received if you had been elected at the FRA.
By suspending benefits at age 66, you will increase your monthly benefit by 8% per year until age 70, for a total of 32%.
If you increase 75% by 32% you get 99% (.75 x 1.32 = .99).
In other words, you can take Social Security from 62 to 66, suspend benefits from 66 to 70, and still get 99% of the benefit you would have received you waited until the FRA.
This should not be viewed as a claiming strategy, only as a means of minimizing the damage of a mistake.
There are two reasons one wouldn’t want to elect at 62 with the intent of suspending at the FRA:
- If you die between 62 and the FRA, your widow would be permanently stuck with a substantially reduced benefit
- You would forfeit any future option of claiming a restricted spousal benefit –
- Once you file for your own benefit, even if it’s in suspension, your spousal benefit is reduced as if you were actually receiving your benefit.
If your own suspended benefit is higher than your spousal benefit, you will not receive a spousal benefit.
Maximize Social Security Benefits For Your Spouse Who Has Not Started Their Benefits
If your spouse has not elected to take their SSI yet, delaying their benefits may offset the mistakes you’ve made already.
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