How you can change your mind if you already claimed your Social Security Benefits
Founder and CEO, The Doherty Method
There are two ways you can change your mind after you have already claimed your Social Security benefits. You may be aware of one way to change your mind, but hardly anybody is aware of the second option.
When to claim your Social Security benefits will be one of the biggest financial and retirement decisions you will make in your lifetime. After making that big decision, many people wonder if they made the right choice because they know they are going to receive that benefit every month for the rest of their life.
What happens if you claimed your benefit at age 62 and later regretted that decision and wished you had delayed so your benefit would grow by 6% – 8% per year for every year you delayed claiming it past age 62. Or what if you retired from your job at age 62, claimed your benefits and shortly after received an incredible job offer and went back to work. Because your new job pays you a very good income, you don’t need your Social Security benefit and wished you had never claimed it.
Received Benefits For Less Than 12 Months
You actually have two ways in which you can change your mind. The first way is if you had been receiving your benefits for less than 12 months, then you can pay back all the monthly benefits you have received and Social Security would consider you to have never claimed your benefits.
For example, if someone had a Full Retirement Age of 66 and their Social Security benefit statement says that if they wait until age 66 to claim, they will receive a monthly benefit of $2,000.
$1,500 – Reduced Monthly Benefit At Age 62
But they decide to claim at age 62 and because they claimed early, or prior to their Full Retirement Age, their monthly benefit is reduced to only $1,500 per month.
Regret Their Decision After 6 Months
After 6 months of receiving benefit payments, they regret their decision and wished they had not claimed their benefits early. Well, because they have not been receiving their benefits for more than 12 months, they could pay back all the benefits they have received so far and it will be as if they never claimed their benefits.
$1,500 x 6 Months = $9,000
They have been receiving benefit payments of $1,500 per month for 6 months. That means they received a cumulative total of $9,000 ($1,500 x 6 months) of Social Security benefits over that 6 month period.
After Paying Back $9,000, Will Be Considered To Have Not Claimed Their Benefits
If they pay back to Social Security the cumulative total of $9,000 of benefits they received over that 6 month period, then Social Security will considered them to have not claimed their benefits yet.
Grow By A Minimum Of 6% – 8% Per Year
Their benefit will grow by a minimum of 6% – 8% per year for every year they delay up to age 70.
Many people are somewhat aware of that first option to change your mind by paying back all the benefits you have received if you have been receiving them for less than 12 months. But there is a second way to
change your mind that very few people are aware of. This second option involves suspending your benefits at your Full Retirement Age.
Claim At Age 62, Go Back To Work At Age 65
To illustrate this second option, let’s assume that you retired and claimed our reduced benefits at age 62. Now you are age 65 realize you are bored with retirement and go back to work.
Receiving Benefits For More Than 12 Months
Your job pays you a large enough income that you really don’t need your Social Security benefits, but you have been receiving benefits for over 2 years, which means you can no longer use the first option of paying back all the benefits you have received because you have been collecting those benefits for more than 12 months.
At Full Retirement Age – Suspend Benefits
This is where the second option comes into play. If you had a Full Retirement Age of 66, then when you turn age 66, you can “suspend” your benefits, which means you will stop receiving your monthly benefit. For every year your benefit is suspended it will grow by a minimum of 8% per year up until age 70. I say a minimum of 8% because if there are any COLA increases while the benefit is suspended, you can add that COLA percentage on top of the minimum 8% increase.
Benefit Will Be A Minimum of 32% Bigger
If you suspend your benefits and have a Full Retirement Age of 66, when you un-suspend your benefit 4 years later at age 70, your benefit would be a minimum of 32% larger than the benefit you suspended at
age 66. With a little bit of inflation and annual COLA increases, your age 70 benefit could easily be over 40% bigger.
Let’s look at some real numbers.
Age 62 Claim Reduced Monthly Benefit – $1,500
This person had a full retirement age benefit of $2,000 per month. But they claimed their benefit early at age 62, as a result, the amount of their monthly benefit was reduced to only $1,500 per month. We assumed an annual COLA increase of 2.5% per year and that is why their monthly benefit increases a little bit every year. Their monthly benefit grew to $1,537 at age 63, $1,575 at age 64 and $1,615 at age 65. Once again, their monthly benefit grew bigger each year because of the assumed annual COLA increase of 2.5%.
Sometime between age 65 and age 66 this person gets a great offer from his or her old employer to come back to work. The money is too good to pass up and they decide to take the offer and go back to work. Because they are earning a good income from their job, they really don’t need their monthly Social Security benefit, but because they have been receiving their benefits for more than 12 months, they don’t have the option of paying back all the benefits they have received.
At Age 66 – Suspend Benefit
It turns out they do have another option. Once they reach their Full Retirement Age of 66 they can “suspend” their benefits. When they suspend their benefits, they will stop receiving their monthly Social
Security benefit check, but their monthly benefit will now grow by a minimum of 8% per year up until age 70.
Un-suspend Benefit At Age 70 – Receive $2,411
At age 70 their benefit is un-suspended, and they begin to receive a monthly benefit of $2,411. When they suspended their benefit at age 66, they were only receiving $1,615 per month, when their benefit was un-suspended at age 70 it had grown to $2,411 per month.
Increased Benefit By $796 Per Month & $9,552 Per Year
With the annual COLA increases added to the minimum annual increase of 8%, they increase their monthly benefit by $796 per month or $9552 per year ($796 x 12), which is almost a 50% increase.
Can Un-suspend Anytime Between Full Retirement Age and Age 70
You don’t have to wait until age 70 to un-suspend your benefit, you can un-suspend it anytime between your Full Retirement Age and age 70.
Can Suspend Benefit at age 67, 68 or 69
You can also suspend your benefit if you are older than your Full Retirement Age but younger than age 70. For example, if this person was age 67 or 68 or even 69 when they went back to work, they could
suspend their benefit at either one of those ages, receive the minimum increase of 8% per year and receive the maximum increase in their monthly benefit if they un-suspend it at age 70. Once again, they could un-suspend their benefit before age 70 but they will not receive the maximum increase. In other words if they un-suspend prior to age 70, their monthly benefit will be less than the benefit amount they would have received had they waited until age 70 to un-suspend it.
Can Suspend Benefit For ANY Reason!
In this example, the reason this person suspended their benefit was because they went back to work and did not need their Social Security income. But you can suspend your benefit for any reason or no reason
at all. If you are receiving your Social Security benefit, as long as you wait until your Full Retirement Age or later, you can suspend your benefit. You can also un-suspend your benefit at any age up until age 70 but if you wait until age 70 to un-suspend your benefit, you will receive the maximum increase possible.
Many people think that once they claim their Social Security benefits they will have to live with that decision for the rest of their lives. But it turns out that is not always the case. In the right situation there are two ways you can change your mind.