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Social Security cutting do-overs

By Jennie L. Phipps ·
Thursday, August 26, 2010
Posted: 4 pm ET

Another retirement planning strategy is about to bite the dust.

The Social Security Administration sent the Office of Management and Budget a proposal to revise the policy that allows recipients to change their minds midstream, pay back the Social Security that they have already received and refile for benefits at the age and level they are now.

These "do-overs" aren't anything new, but they've gotten a lot of attention in the last couple of years as boomers faced retirement and began looking for every retirement planning angle to improve their incomes.

Bankrate covers the three kinds of currently available do-overs in this piece. The one Social Security would like to get rid of works like this. You file SSA Form 521, "Request for Withdrawal of Application" with your local Social Security office. The SSA will let you know how much you must repay, including any spousal benefits before you can reapply for a higher payment based on your current age. If you originally filed at age 62 and are now 70 and earning $1,500, you'll owe more than $125,000, including Medicare premiums, but when you restart, you'll make 132 percent more, or $3,480 per month

This certainly works best for people who have retirement savings squirreled away. And even so, it's a bet that you and your spouse are going to live long enough to earn back what you had to repay.

In any case, the option is apparently about to disappear. A spokeswoman for Social Security says the proposed rule change would allow retirees to withdraw their application for Social Security benefits within 12 months of when they first began receiving benefits. Within that time period, a recipient could decide he had filed too early, pay back benefits and refile when he gets older and is eligible for more money.

Oh well, it was good while it lasted.

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1 Comment
August 28, 2010 at 6:39 am

I applaud BankRate for promptly correcting inaccuracies that appear in their stories. However, I think that when a story is updated, the fact that's it's been updated should be noted.