A whopping 85% of Americans fail to maximize their Social Security benefits! If that is not bad enough, at least 70% of retiring Americans (10,000 per day) accept less than what they are entitled at full retirement! Why? Lack of understanding of the rules & regulations and/or lack of education about Social Security and the options available to those of retirement age is that WHY. Also, for some reason, people think the words retirement and Social Security are synonymous – they are not! We are seeing more and more clients that are wanting to RE-DO or SUSPEND their benefits until a later age because they are unhappy with the decision they made at filing day or their life situation changed.
RE-DO is when you are within the one year (not one year and one day) period of receiving your first benefit you can change your mind about your filing decision. This is available to everyone, but comes with a tough caveat – you must pay back all the money you received including spousal or family benefits paid off the worker’s Primary Insurance Amount (PIA). You do not have to pay any interest or penalty on the money that needs to be paid back.
Why would someone do this? Because they realized, through education that filing as early as possible may not be the correct answer for them – ELIMINATES Delayed Retirement Credits, REDUCES Survivor Benefits, REDUCES benefit amount by 25-30%, ELIMINATES claiming strategies that can greatly improve your lifetime income stream, and LIMITS your income potential because of the Earnings Limitations rules. Enough said.
Some people need to draw at age 62 but we want them to know their options and the ramifications of their decision. It is heartbreaking to sit down with a couple that has realized their mistake and cannot afford a RE-DO.
SUSPEND is when you are at least Full Retirement Age (depends on your DOB) and voluntarily stop your benefit and decide to restart later, thus allowing your benefit to improve with Delayed Retirement Credits at 8% per year plus any Cost of Living Adjustments. Caution, any other benefits such as Spousal Benefits paid off your work record will also be suspended. This does not require repayment of funds, but you must be Full Retirement Age. Before you do this, you need to make sure that the numbers make sense for this strategy. Remember, every Social Security situation is personal – it is your story, your top 35 years of earnings history that cannot be duplicated. Advice from a friend, family member or other individual that is well-meaning, but has little knowledge of your situation and the law, throw up a CAUTION FLAG.
There is one other way to correct what you consider a filing mistake (drawing between the ages of 62-66/67) – working more. You would not suspend or re-do, but based on your salary, Social Security would reduce your benefit $1 for every $2 you earn over $16,920 per year. Good news, once you hit Full Retirement Age most of the benefits withheld due to your earnings are reinstated allowing your future Social Security benefit to grow. Unfortunately, you never recoup every $ lost to the “Earnings Test” reduction.
Professional advice is simply a phone call away at 601-954-0699 or email us at dthompson@pillarsllc.com or visit our website at www.pillarsllc.com. Roy and Diane are both National Social Security Advisors and Roy is a former CPA of 40 years. We are Corinth, MS residents, but we service clients nationwide.
