Social Security recipients get a choice as to when they can sign up. The earliest age to file for benefits is 62. But you're not eligible for your complete monthly benefit based on your personal wage history until you reach full retirement age. That age is 67 if you were born in 1960 or later. Otherwise, it's either 66, or 66 and a certain number of months.
You can also delay your Social Security filing past full retirement age for a larger monthly benefit. For each year you do, up until age 70, your benefit gets an 8% boost.
Image source: Getty Images.
Many people rush to claim Social Security before full retirement age to get their money sooner and then regret it later. If that's what happened to you, you're not out of luck. That's because all Social Security recipients are entitled to a single do-over in their lifetime.
Here's how it works. Say you claimed Social Security at 62 and have realized your monthly payments are way too low for comfort. If you withdraw your application for benefits within a year of your filing and repay the Social Security Administration the money it paid you, you'll get a clean slate. This allows you to file for Social Security at a later age and lock in a much higher monthly benefit for life.
The do-over option is a good one in theory. And it's something seniors are often advised to take advantage of. But there's one big flaw in that plan.
What are you going to do about the missing money?
It's a nice thing that the Social Security do-over exists. But to capitalize on that option, you'll need to figure out how you're going to replace the Social Security income you're giving up.
Say you were collecting $1,400 a month in Social Security and using it to help pay the bills. You may come to the realization that you don't want to settle for just $1,400 a month and would rather undo your filing and sign up again later for a larger monthly benefit. But if you're reliant on that $1,400, you'll need to make sure you can replace it before undo your Social Security claim.
Now that could look like a number of different things. It could mean going back to work on a part-time basis, or perhaps even taking a full-time job. It could also mean downsizing to a smaller home or relocating to an area that's less expensive.
But either way, you'll need some sort of plan to replace that income before you undo your Social Security filing and give up your monthly benefits. And if you're not sure you'll be able to, then you may need to resign yourself to whatever benefit you've locked in.
Think carefully before signing up in the first place
The Social Security do-over option isn't a perfect one because many people who want to take advantage of it aren't in a position to repay the money they've received. Many are also not in a position to replace that income with another source. So think carefully not just before you rush into a do-over situation, but before you sign up for Social Security in the first place.
And also, before you rush to quit a job in conjunction with claiming Social Security, make sure you're really happy with your filing decision. Just because you decide you're willing to go back to work if it allows to do undo your filing doesn't mean a job will be waiting to welcome you with open arms. It's ultimately best to get your Social Security claim right from the start.
The Motley Fool has a disclosure policy .
Most Popular
Comments / 0