Social Security is intended to assist older Americans with their retirement expenses. And for those who might be in a place to retire early , Social Security can help them achieve that goal.
But planning for retirement carries a key question: When should you start taking Social Security?
Deciding when to claim Social Security is, as one might imagine, a crucial aspect of retirement. If you regret starting your benefits early, a change in your financial situation may allow you to reset your benefits through a Social Security do-over.
Here’s what you need to know.
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1. Who’s eligible?
Some of it — well, a lot of it — depends on your age.
You can get Social Security benefits — based on your average earnings over 35 years — if you're 62 or older or have a disability or blindness with enough work credits. Family members qualifying on your record don't need work credits, but if they apply after Dec. 1, 1996, they must be U.S. citizens or lawfully present noncitizens.
If you're receiving retirement or disability benefits, your spouse may qualify, if they are 62 or older.
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2. Yes, you can delay benefits
The do-over options for Social Security are to withdraw benefits or suspend benefits.
Suppose you started to take Social Security and you suddenly receive an inheritance or you take a job that will support you without needing the Social Security income. You may want to consider backing out of your benefits.
You can only withdraw your benefits if you started taking them within the last 12 months. And yes, you have to pay back the money Social Security paid to you.
If you have reached full retirement age, you can suspend your benefits to earn more retirement credits and increase your future monthly payments. At age 70, your benefits resume automatically.
3. What’s the difference between suspending and withdrawing benefits?
Once again, a lot of this has to do with age. Full retirement age in the U.S. is 66 for those born between 1943 and 1954 and 67 for those born in 1960 or later.
If you have been approved for benefits at any age, you can cancel or withdraw your application within 12 months. You can reapply later.
If you've reached full retirement age but aren't 70 yet, you can suspend your retirement benefits. That lets you earn your delayed retirement credits each month, increasing your future benefit payments.
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4. How do you request to suspend or withdraw benefits?
The Social Security Administration is clear about how you can suspend or withdraw benefits.
If you apply for Social Security benefits and the SSA hasn't made a decision, you can voluntarily suspend benefits for any month you haven't received payment. If you're already receiving benefits, you can suspend payments until age 70, with suspension beginning the month after your request.
Payments automatically restart when you turn 70, but you can reinstate them earlier. Suspension requests can be made in writing.
Here’s another important fact: During suspension, others receiving benefits on your record, except a divorced spouse, will also have their benefits paused, and Medicare premiums won't be deducted.
5. Do you have to pay back SSA for money you’ve already received?
If you withdraw your benefits, you must repay everything you received in the last 12 months.
In addition, you will have to pay back spousal benefits, dependent benefits, federal and state taxes, and Medicare premiums that may have been deducted from your Social Security benefit.
Your Medicare Part B premiums can’t be deducted from your suspended benefits. You will be able to pay the premiums through your bank or financial institution.
This will also affect others who rely on your benefits such as a spouse or ex-spouse.
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Voluntary suspension begins the month after your request, not before. If your benefits are suspended, they will automatically resume when you turn 70.
On the other hand, if you want to restart payments before then, you can request reinstatement.
7. Does it make sense to withdraw my Social Security?
That’s really up to you.
Withdrawing your Social Security benefits can lead to a higher future benefit, because it lets you reapply later when your monthly amount has increased.
On the other hand, this option requires you to repay all the benefits you've already received, which may be a chunk of change if you've been collecting for nearly a year — or others are drawing benefits under your record.
You'll stop receiving monthly checks and have to repay everything, so it drills down to whether the potential increase in future benefits justifies the immediate financial burden of a withdrawal.
8. When does it make sense to do a do-over?
Again, this decision is going to depend on your circumstances.
If you’re getting reduced Social Security benefits because you claimed them before reaching full retirement age, and you can cover your monthly expenses without the Social Security income, it might be worth considering a do-over for a higher future benefit.
Returning to full-time work could allow you to suspend your current benefits. It’s important to weigh this decision, but remember, you can always reapply if you have withdrawn your benefits or resume benefits if you find you need them to cover your expenses.
Bottom line
When to start receiving Social Security benefits is one of the big retirement decisions, and it depends on many factors.
If you decide to take it early but then start a side hustle that brings in more money than you need, you may want to withdraw or suspend your benefits. You’ll be glad there are a couple of do-over options.
As you plan for your retirement, you need to understand these options. Working with a financial planner before you retire will help you determine how much money you need, how you need to invest it, and when it is the right time to begin collecting Social Security.
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt . Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
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