If you applied for Social Security too soon, you might be able to hit the reset button. Source: flickr user flattop341.
More than 40% of people choose to apply for Social Security at age 62, the earliest age of eligibility, and many others start collecting benefits before reaching full retirement age. Unfortunately, one survey found that nearly one-fourth of people who choose to receive benefits early come to regret this decision later.
If you started collecting Social Security too early, there are two things you could potentially do to change your situation and boost your Social Security checks for the rest of your life.
The benefits of waiting
The longer you wait to apply for Social Security benefits, the higher your monthly checks will be. And the difference between applying early and waiting to apply can be bigger than you may think.
By applying early, you'll lose 6.7% of your full benefit amount for each year before you reach full retirement age, up to three years early. Beyond three years, your benefit will be reduced by 5% per additional year. In other words, if your full retirement age is 66, and you apply for Social Security at age 62, your benefit will be reduced by 25% (three years times 6.7%, plus one year at 5%).
On the other hand, by choosing to wait until after your full retirement age, you can earn a delayed retirement credit of 8% per year. The longest you can wait is until age 70, at which point your benefit amount would be 32% more than it would be had you applied at full retirement age.
For example, consider a retiree whose full retirement age is 66. The difference between applying early or late is huge. Applying at 62 results in a monthly check that is a full $500 less than he or she would have received by waiting until full retirement age. Conversely, delaying nets a $640 gain.
| If you apply at this age... | Your monthly benefit will be |
| 62 | $1,500 |
| 63 | $1,600 |
| 64 | $1,734 |
| 65 | $1,866 |
| 66 | $2,000 |
| 67 | $2,160 |
| 68 | $2,320 |
| 69 | $2,480 |
| 70 | $2,640 |
As you can see, the difference can be significant. If you'd gladly trade in your reduced checks for some higher ones in the future, here's what you might be able to do.
Did you begin collecting benefits within the past year?
If you started receiving benefits less than 12 months ago and have now changed your mind, you may be able to withdraw your application and reapply at a future date. If you do this, you must pay back any benefits you've already received. Basically, by withdrawing your application and returning any benefits you've already received, it's as if you never started collecting in the first place -- meaning that your future benefit amount will not be reduced because you applied early.
The process for withdrawing your application for benefits is as follows:
- Fill out Social Security form 521: "Request for Withdrawal of Application"
- Send the form to the Social Security Administration, which will them notify you of the amount you need to repay
- You'll then be notified once a decision has been made (however, it's a pretty automatic process)
Keep in mind that you can only do this application withdrawal process once in your lifetime. And that there's no way to withdraw your application after 12 months has passed.
Are you now at full retirement age?
If you applied for Social Security early and you're now past your full retirement age but haven't reached age 70, there's a different option available to you. You have the ability to suspend your benefits (stop receiving them), and resume collecting them at a later date.
Let's say that your full retirement benefit at age 66 would be $2,000, but you decided to apply at age 62, resulting in a reduction to $1,500. Once you reach 66, you can choose to suspend your benefits, and receive an 8% increase for each year you decide to go without benefits. Here's what this could do to your monthly checks, depending on how long you choose to suspend your benefits.
| If you resume collecting benefits at age... | Your "delayed retirement credit" will be... | And, your new benefit will be this much... |
| 67 | 8% | $1,620 |
| 68 | 16% | $1,740 |
| 69 | 24% | $1,860 |
| 70 | 32% | $1,980 |
It's also worth mentioning that if you suspend benefits, they will automatically restart at age 70 -- so if you want to maximize your delayed retirement credits, you won't need to reapply at that time. While your benefits won't be quite as good as they would have been if you had waited in the first place, by suspending at 66 and restarting benefits at 70, you can almost bring your benefit back to your full retirement amount.
There are a couple of things to consider, though. First of all, if you're receiving Medicare, you'll need to begin paying your Medicare Part B premiums directly if you choose to suspend benefits as they'll no longer be withheld from your Social Security checks. And as an added perk, when you suspend benefits, your spousal and survivor benefits will be based on your new, higher benefit amount once you resume receiving payments.
Delayed gratification could provide peace of mind
Social Security is designed to provide you with an equal amount of money during your lifetime, no matter when you choose to apply for benefits. For example, if you begin collecting $1,500 per month at age 62, $2,000 at age 66, or $2,640 per month at age 70, it will theoretically add up to the same amount throughout your retired life. However, consider the possibility that you or your spouse could live longer than you may expect.
Not only does Social Security provide you with guaranteed income for life, but it increases over time to keep up with inflation. In this way, Social Security can be looked upon as a form of "insurance" against outliving your retirement savings. If you're worried about you or your spouse having enough money at age 85, 90, or even 100, it may make sense to wait until your Social Security checks are a little higher by taking advantage of one of these "do-over" methods described here.
