How to boost your Social Security
Social Security allows retirees to begin taking their benefits as early as age 62, but that privilege comes at a price: the benefit amount is permanently reduced.
The age 62 benefit is 30 percent less on average than the benefit a retiree would get at full retirement age, and a full 60 percent less than would be the case if the retiree delayed benefits until age 70.
Some workers take the benefit at 62 in order to retire early and later come to regret their decision. Fortunately, there is a way to reverse that decision and come out ahead.
Social Security’s secret
The Social Security Administration doesn’t exactly advertise it, but you can legally repay your early retirement benefits and then reapply for Social Security at a later age and a larger benefit.
Here’s how it works. Suppose you retired at age 62 and claimed a $13,000 early Social Security benefit. Your normal retirement age is 66 and, had you waited until then, your benefit might have been $16,900.
At age 66 you decide you feel good and will lead a long life. So you contact Social Security, repay them four years worth of early retirement benefits—$52,000—and then reapply for your new $16,900 benefit.
Amazingly, Social Security does not charge you any interest for that four-year loan of $52,000, nor do they force you to adjust the payback to reflect inflation over the previous four years.
Even better at 70
Even better, if you waited until age 70 and repaid $104,000, the new benefit at 70 would be $20,800 per year, an increase in annual income of $7,800.
A recent study for the National Center for Policy Analysis by Laurence Kotlikoff, economics professor at Boston University, concluded that retirees who follow this strategy can dramatically improve their lifetime consumption standards.
That’s partly because Social Security comes with a better guarantee of future income than does any investment or savings vehicle, and the government adjusts the benefit for inflation each year.
The exciting feature of this benefit payback option is that retirees have the ability to rectify the “mistake” of taking Social Security early, should they reach an older age and foresee that it is likely their life spans will be above average, the study found.