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| Image by iNNoVaNDiS via Flickr |
About 10 years ago, the Social Security Administration made a change to their rules that took a powerful option off the books – the payback and Do-Over.
Back in the olden days (prior to December, 2010), there was an option available that allowed a person to file for Social Security retirement benefits at any age, and then later pay back all of the benefits received and re-file at a later age. This action effectively cleaned the slate and allowed starting over at your later age at a higher rate.
When the rule was changed, the payback and re-file now must be completed within 12 months of your filing date. But all is not lost – there is still a way to reset things if you find yourself having filed earlier than you really needed to and you wound up working longer than you thought.
The Do It Yourself Do Over
If you’re still under Full Retirement Age (FRA) and working, you’ve probably heard about how earning more than a certain amount will result in forfeiture of part of your benefits. (More on the specifics on the earnings test here.) The thing about forfeiting some of your Social Security benefit is that – once you reach FRA, you’ll get credit back for the benefits that you forfeited. (This only applies to your own retirement benefit, not spousal or survivor benefits.)
In a way, by earning more than the limits, you’re effectively paying back the amounts that are being forfeited, and at FRA your benefit will be recalculated, which is the Do Over in disguise.
Granted, this isn’t exactly as powerful as the original Do Over, but it’s a way that you could re-set when you’ve started receiving benefits earlier than you needed and would like to get that credit back and file at a later age, without as much (or with no) reductions in your benefit.
Sterling Raskie, MSFS, CFP®, ChFC®
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