Provided by Sara Frank-Hepfer
Although the social security system allows claims for reduced worker benefits as early as age 62, claiming early may not be your best choice. Fortunately, if you claimed early, you may be able to take advantage of a do-over option that restarts the clock on your benefits.
If you applied for social security within the last 12 months and are currently receiving benefits, you may be able to withdraw the claim and reapply at a later date. If you withdraw the application, however, you must repay all benefits received, including any received by a spouse or dependents. This do-over option is limited to a 12-month period and may be used only once in a lifetime.
You may consider this withdrawal strategy in a couple of situations:
o You chose to take early benefits, only to discover that it was not the right choice.
o You are in need of a temporary cash flow and will be in a position to pay back the benefits within the 12-month period.
If you have already reached your full retirement age (FRA), there is another do-over option to consider. You may voluntarily suspend social security benefits-and any other benefits received on your earnings record-without having to repay. The suspended benefits would earn delayed retirement credits of 8 percent for every year of voluntary suspension up to age 70. Keep in mind, however, that any Medicare premiums will need to be paid out-of-pocket during the period of suspension.
For example, if Jane is collecting 75 percent of her FRA amount at age 62 and voluntarily suspends her FRA to age 70, she will earn 32 percent (4 years at 8 percent = 32 percent) in delayed retirement credits. Thus, starting at age 70, Jane could receive 99 percent (75 percent ◊ 132 percent = 99 percent) of her FRA benefit.
It is common to have questions about when to claim social security benefits-and mistakes do happen. In fact, many individuals are unaware that taking benefits before FRA will result in a significant reduction. We have a good understanding of the choices available to help you make the right decision the first time. If, however, you made a choice that you now regret, a do-over option may provide the solution you need.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
Sara Frank-Hepfer is a financial consultant located at Financial Technology, Inc., 1500 Abbot Road, Suite 150, East Lansing, MI, 48823. She offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. She can be reached at (517) 351-8600 or at frank@financialtec.com.
© 2015 Commonwealth Financial Network®
This was printed in the February 21, 2016 – March 5, 2016 edition.
