A recent survey from Nationwide Retirement Institute identified an important knowledge gap where Social Security benefits are concerned. Fewer than 30% of participants were aware that claiming decisions could be undone in certain situations.
That is problematic because retirees that regret collecting Social Security early can reverse their claim or suspend payments to earn a bigger benefit. But those options, while not designed to be secret, are undoubtedly missed opportunities for some beneficiaries given that not many people know they exist.
Read on to see how claiming age impacts retirement benefits, and to learn more about Social Security's do-over and suspension options.
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Retired workers can significantly increase their Social Security benefit by claiming at age 70
Social Security benefits are determined via a two-step process. First, the primary insurance amount (PIA) is calculated by applying a formula to a worker's average indexed monthly earnings (AIME) amount, which is the inflation-adjusted earnings from their 35 highest-paid years of work expressed as a monthly average. The PIA is the benefit a worker will receive if they claim Social Security at full retirement age.
Second, the PIA is adjusted for early or delayed retirement. Workers can claim Social Security at age 62, but the payout is adjusted lower or higher depending on claiming age. Specifically, workers that claim Social Security before full retirement age will receive a smaller benefit, meaning less than 100% of their PIA. But workers that claim Social Security after full retirement age will receive a bigger benefit, meaning more than 100% of their PIA.
The only restrictions to that rule are (1) eligibility starts at age 62, so no one can claim earlier and (2) delayed retirement credits stop accruing at age 70, so it never makes sense to claim later.
The chart below defines full retirement age based on birth year. It also shows the benefit (as a percentage of PIA) a retiree will receive if they claim Social Security at ages 62 and 70. In other words, the chart shows the smallest and biggest payouts for retired workers of different birth years.
|
Birth Year |
Full Retirement Age |
Benefit at Age 62 |
Benefit at Age 70 |
|---|---|---|---|
|
1943-1954 |
66 |
75% |
132% |
|
1955 |
66 and 2 months |
74.2% |
130.6% |
|
1956 |
66 and 4 months |
73.3% |
129.3% |
|
1957 |
66 and 6 months |
72.5% |
128% |
|
1958 |
66 and 8 months |
71.7% |
126.6% |
|
1959 |
66 and 10 months |
70.8% |
125.3% |
|
1960 and later |
67 |
70% |
124% |
Data source: The Social Security Administration.
As shown above, retired workers born in 1960 or later will receive 70% of their PIA if they claim Social Security at age 62, but they will receive 124% of their PIA if they claim at age 70. Put differently, those retired workers can increase their benefit 77% by collecting Social Security at age 70 rather than age 62.
An example using dollars (instead of percentages) can really drive the point home. Among newly retired workers, the average PIA was $1,984 in 2022. That means the average person in that group would have received a monthly benefit of $1,984 if they claimed Social Security at full retirement age. However, a worker born in 1960 or later with a PIA of $1,984 would receive a monthly benefit of $1,389 if they claimed at age 62, or a monthly benefit of $2,460 if they claimed at age 70.
Retired workers can (sometimes) undo a claiming decision or suspend payments to earn a bigger Social Security benefit
Most retired workers collect Social Security before full retirement age. In fact, in any given year, about one-quarter of newly awarded retired workers start benefits as soon as possible at age 62, and roughly two-thirds start before full retirement age. By comparison, less than one-tenth of newly awarded retirees wait until age 70 to collect Social Security.
Some retired workers that claim early eventually regret the decision. Fortunately, there are two ways to fix the situation. The claiming decision can sometimes be undone entirely, or payments can be suspended between full retirement age and 70. Both options ultimately result in a bigger payout for retired workers, as explained below.
Undo a claiming decision: Retirees can withdraw or cancel their benefits application by filing a form SSA-521 with the Social Security Administration. But there are two important caveats: (1) Benefit applications can only be withdrawn or canceled within 12 months of approval, and (2) retirees that have started collecting benefits must repay every dollar, including Medicare premiums withheld and spousal benefits claimed against their work record.
Undoing a claiming decision erases the benefit reduction incurred for collecting Social Security early. In other words, retirees that undo their claiming decision would be entitled to their PIA at full retirement age. They would also earn delayed retirement credits thereafter (until age 70) that increase their future payout by two-thirds of one percent per month, or eight percent per year.
Suspend benefit payments: Retirees can suspend their benefits by notifying the Social Security Administration, either orally or in writing, but only if they have reached full retirement age. Benefits will automatically be reinstated at age 70, or retirees can request that benefits be reinstated earlier by contacting the Social Security Administration.
Suspending payments does not erase a benefit reduction. But it does let retirees earn delayed retirement credits that increase their payout by two-thirds of one percent per month, or eight percent per year. For example, a person born in 1960 or later that suspends payments at full retirement age can increase their benefit by 24% if they wait until age 70 to reinstate Social Security. In other words, if that person was receiving $1,000 per month before suspending payments, they will receive $1,240 per month (24% more) after Social Security is reinstated.
