When To Claim Social Security Retirement?
Q. I was under the impression that when you reach a certain age, you have the right to begin receiving Social Security benefits and that the earlier the age, the less you receive by way of benefits.
This seemed relatively simple, but I have recently been told there exist not-so-known rules within the Social Security laws and regulations that can be utilized to maximize retirement benefits.
I also learned that you might waive your right to claim these benefits later if you don’t act within a specific time frame. I want to learn more about claim strategies.
A. The complexities of the Social Security retirement rules are overwhelming. This is especially true regarding the advantages and disadvantages of choosing the best claim date, given your situation and retirement needs.
Timing Of Your Claim Date To Commence Benefits
The timing of your claim start date is crucial. Your strategy will determine the amount of Social Security benefits you will be eligible to receive over your remaining years.
Fully Paid Out Claim Value
On average, the value of a completely paid-out social security retirement claim can be worth a million dollars or more. So, choosing a strategy can save or cost you hundreds of thousands of dollars depending on various factors.
You need to know that once you choose a claim date, you have minimal time to change your date. See below regarding some of these strategies.
Social Security Will Not Advise You On Best Claim Dates
The Social Security Administration neither has the legal obligation nor the incentive to assist you in determining which claim strategy will yield the highest financial return. Just the opposite is true.
The goal of the Social Security Administration is to preserve and grow the fund, not deplete it.
One example of a claim strategy is whether to “file and withdraw” or “file and suspend” your Social Security benefits. The terminology here has been used in different ways but essentially relates to the same strategies discussed below:
File and Suspend Strategy
The benefit-enhancing strategy of “file and suspend” was a little-known rule added to Social Security twenty-three years ago as part of the Senior Citizens Freedom to Work Act. The goal was to help couples plan for their retirements.
The “file and suspend” is a strategy that can substantially increase benefits for qualifying couples through the use of a combination of spousal benefits and what Social Security calls delayed retirement credits.
To qualify, at least one person must have reached full retirement age, currently 66 for people born between 1943 and 1954.
File And Withdraw Strategy
The “file and withdraw” strategy, sometimes called the “Do-Over or Do-Again” option, arose from workers’ difficulty in selecting the best start date to receive the benefits.
Many retirees choose to begin receiving their benefits as soon as they are eligible. The start date can be as early as 62 years of age. Unfortunately, it does not take long until these retirees realize they might have been much better off waiting a few more years. But this depends on so many other factors, such as the state of the economy, your health, and how much you enjoy your work.
The Do-Over
However, a little-known provision in the Social Security rules allows retirees to claim a “do-over” regarding their original choice on the start date. But there are specific requirements to qualify for this claiming strategy.
Expressly, to qualify for a “do-over,” you will need first to file to suspend your benefits, pay back the total Social Security amount collected (without interest or penalties), claim a tax credit or deduction for any income taxes paid, and then re-file for the more considerable benefit amount that you would be entitled to at that later age.
This rule allowing a “do-over” became effective on December 8, 2010. However, you are allowed one “re-do” per lifetime, and that “re-do” must occur within 12 months of the first month of entitlement.
Locating A Financial Planner
For more information, consider consulting with a verified financial planner.
