Social Security Administration Seeks to Put an End to Do-Overs

Social Security Administration Seeks to Put an End to Double Dipping of BenefitsPatience often pays, especially when it comes to Social Security benefits. Sure, you can start collecting Social Security anytime after age 62, but for each year you wait, your payments will increase by 7% or 8%.

"Payments increase about 7% for every year between early retirement age – 62 – and your full retirement age. So if your full retirement age is 65, your payments will increase 7% for each year between 62 and 65, and then an additional 8% for each year between 65 and 70," says Laurence Kotlikoff, a professor of economics at Boston University and co-author of Spend 'Til the End.

For those who can afford it, waiting to tap into Social Security benefits is definitely a more lucrative bet. However, some people are taking advantage of a provision that allows them to earn even more from their Social Security benefits. Called a do-over, the recipient taps into their benefits at age 62 and invests the funds in a safe investment that earns a decent rate of return for several years, then they pay the money back and pocket the interest earned.

Do-overs were included in the Social Security Handbook to allow those who jumped the gun and started taking benefits at age 62 to correct their mistake. All they have to do is file IRS form 521, pay the benefits they've already received back – in full, but with no interest, penalty, or adjustment for inflation – and start taking the larger benefit as if they had waited all along.

Over the last few years, do-overs have become more well known as an investment strategy of sorts. But now the Social Security Administration wants to put a stop to the practice.

"Social Security has sent a proposed regulation to OMB [the Office of Management and Budget] for review that would establish a 12-month time limit for the withdrawal of a retirement benefit application. The proposed regulation would also permit only one withdrawal per lifetime," explains Mark Lassiter, a Social Security Administration spokesperson.

In other words, you'll now have only one year to change your mind and return your benefits, which makes it less of a strategy and more of a way to correct your mistake. One can assume that was the intention of form 521 all along.

Lassiter says the proposed regulation would also affect people who have already taken their benefits, meaning if this was your plan, you're going to want to watch how this situation progresses very carefully. If you miss your opportunity to pay your benefits back – and you've passed your 12-month window – you may be stuck with that low benefit amount for good.

And if you haven't already elected to take your Social Security benefit? My advice remains the same: Hold off for as long as possible, until age 70 if you can, even if it means taking a part-time job or working a little longer. The increase in your benefit amount will be worth it.

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jhfree830

Everyone has different issues to contend with in their retirement years. I read an article in the New York Post SATURDAY edition about twenty years ago about SS. The headline was "TAKE THE MONEY AND RUN". If you can afford to live off what you will receive from SS and other resources then do so. If you do the MATH you will realize how long it will take to break even never mind benefiting from waiting. If you are not ready to STOP working because you cannot get by with what SS and other resoucres you will receive, then continue to work. The best advice I can give is to prepare for your retirement. TAKE the MONEY and RUN. GOOD LUCK!

September 08 2010 at 4:35 PM Report abuse rate up rate down Reply
Bob T.

Most people don't last till they are 70+. If you can, take it early as you can. I took my pension from Home Savings at 55. My good friend said you should hold on till you at least 62. I told him no, I'm taking right now. He never took his pension. He died at 63. At 55 to 62 they paid me over 42,000. If I waited till 62 they would pay me a extra 200 a month. It would take over 17 yrs to recover the 42,000 that I didn't take. I have many friends and family who died before 65 or 66. My brother died at 66 only a year when he retired. My good friend retired at 66. He died at 66. He got one check from S.S. The Government wants you to delay your retirement, so they hope you die before you get your benefits. It's always about the money. It's sad that are Govn. allows the illegals to get Social Security that they never paid in too. The Govn is against the citizens of United States. We need to revamp our Govn. Vote them out in Nov. Go Arizona,Tea Party!

September 06 2010 at 12:15 PM Report abuse rate up rate down Reply
wcoronet

You know what is so distracting from the SS subject in general is the almost total ignorance of the proper use of the the English language. I came to this country in the early 1950's and could not speak the language. However, I could not move to the next grade in ANY public school if I did not pass English spelling and grammer. This is what our education taxes pay for (in advance for the next generation just like SS)! While you may have a point and are already living with the problems of SS today, you do not make credible arguments when you sound like ignorant people. It makes me wonder why -- when I am coming to the age of retirement -- should I listen (or have spent the time listening) to those of you who made no effort to even learn the English language in a tax-payer provided school, but rather have lived "without change" in your local environments and think you are contributing comprehensible or profound comments on SS, overly passionate or not. Thank you to those who have written intelligent opinions and suggestions in a language that many of us have grown with up within the public school system. It seems that these types of comment sites never cease to amaze me as to how ignorant my fellow Americans sound. And guess what, I am just an average person who worked hard, paid SS taxes, have limited savings, make a typo here and there, been unemployed for over 2 years and will rely on SS in the near future if I do not find another position making more than SS. Let me ask you this, if you are working and not collecting SS, are you not making and would continue to make more than what you would lose between the ages of 62, 65 or 70 on SS, while still contributing to the fund for others? Is that not the whole idea that you continue making a higher salary as long as possible before relying on a mere SS monthly payment to do the things you want to do? Obviously, there are other benefits available to the elderly through discounts, coupons, taxes, etc. If you want to retire, you have known for many years what your SS income will be. If you cannot keep working, then it is up to you to help the agencies such as the AARP to make sure that you are getting what you deserve. It is not a perfect system, but I am learning that people do not even know the difference between SSI (disability insurance) and SS (retirement funds). Granted many of us have not been privy to the ins and outs of "money" subjects as those more wealthy or educated have, but do try to empower yourselves through seminars/classes and make comments in proper language. Clearly, Jean should have qualified that the article was meant for certain people who can afford the do-over. I think her other suggestions are based on a person's ability to not have to rely on SS for as long as possible. Otherwise, you choose or have to choose whatever is available to you at the time.

September 04 2010 at 12:01 PM Report abuse rate up rate down Reply
sllewis123

My philosophy is take SS as early as possible. You get more cash by waiting but don't forget inflation. You will be getting depleted dollars. Over 10 years, money loses 18% at 2% inflation; 32% at 4%.

September 03 2010 at 1:43 AM Report abuse +1 rate up rate down Reply
lroach1765

The trouble with this theory is life expectancy. So you wait until age 70 to file, and you live until 73 or 75. If you grab it at 62 for less you may just do better over the long haul. Nobody actually knows yet how long they will live.

September 03 2010 at 12:11 AM Report abuse +1 rate up rate down Reply
mikesohc

run the numbers; if you retire at 62 and get 1200.00 a month, thats 14400. a year times eight years (retire at 70) equals 115,200. even if you get an extra 500. a month at age 70, it will take you nineteen years to break even! (89 years old!) how do you think the average 89 year old spends their day? retire as soon as you can see your way clear to do so,while your health allowes you to do the things you would like to do. enjoy life, its shorter than we know!

September 02 2010 at 5:38 PM Report abuse +2 rate up rate down Reply
willyd3310

We need to get congress to change SS to what it's original intention was. That is to bank every dime that is taken in, and savwe it for future payments. Now they take out every dime payed in every year, and spend it on whatever they feel like. If they had left it like they were supposed to do, it would'nt be a worry about your money being there when you retire!

September 02 2010 at 4:38 PM Report abuse +2 rate up rate down Reply
willyd3310

Watch out if you are disabled, and settle a workmans compsuit. They didn't tell me at the time, but they took the total settlement, and dividid it by the number of years that was my listed life expectentcy ( which was 72 in 1994) and then deducted that amount from my yearly benifits . So my monthly payments ended up $250 less than they would of otherwise. My attorney failed to mention that part, and his % was off the total amount! 4250.

September 02 2010 at 4:34 PM Report abuse rate up rate down Reply
kalvinakita

I have been working and paying into ss since i was 18 yrs. old i have been on ssdi at the age of 62 i know that there is acertain amount you can make each year with out being penalized. When you get disability ss it is full payment as if you reached your full retirement age 65 or what ever year you were born 66 for 1946 baby boomers. at the age of 66 it will just roll over as social security you will still get the same amount if i am wrong please advise me

September 02 2010 at 4:27 PM Report abuse rate up rate down Reply
jeff

This shouldn't been done with Social Security Benefit. Social Security Administion need to stop this. Congress and Senator need to keep their hand out of it. It belong to the peoples that pay in to it not for their pork. It bad that the American have to work longer to pay to put more in it. Congress and Senator think they should give it to ever one that he or her family didn't pay into it. The American peoples work hard for it they should retire at 55 year old to live the life and see the world. The American peoples have had enough remember this in November.

September 02 2010 at 4:12 PM Report abuse rate up rate down Reply