Did You Claim Social Security Too Early? You Might Be Able to Get a Do-Over

By Matthew Frankel Markets Fool.com

If you're currently collecting your Social Security retirement benefits, and you now regret claiming your benefit as early as you did, you might be able to officially change your mind and postpone your benefits until a later date. Specifically, if you applied for Social Security within the past year or have already reached your full retirement age, there are ways you can choose to stop receiving benefits until you're ready.

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If you applied within the past year, you can simply cancel your application

There's a provision that allows a Social Security beneficiary to cancel their application within one year of claiming their benefits. So, if you applied to start collecting Social Security at 62, you have until your 63rd birthday to change your mind and cancel your application. Simply let the Social Security Administration (SSA) know that you've changed your mind (here's the form), and it'll be like you never applied at all. You can then apply to start your benefits over at a later date, and at a higher monthly amount.

Image source: Getty Images.

The major caveat to doing this is that you'll have to pay back all of the benefits you've received so far, which is easier said than done for many retirees. The average benefit paid to a retired worker is about $1,355 per month, so if the average beneficiary chooses to cancel their application after say, 11 months, he or she could be on the hook for paying back just under $15,000 before their request can be processed.

If you're past full retirement age, there's another option

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Alternatively, if you have already reached your full retirement age, you have the ability to suspend your Social Security benefits. You don't have to pay back what you've already received -- you simply stop receiving your monthly benefits. Simply call the SSA or make an appointment at your local Social Security office and let them know you'd like to suspend your retirement benefits.

For every year your benefits are suspended, your checks will increase by 8% (or, 2/3% per month), plus whatever cost of living adjustments are given to all beneficiaries. So, if you choose to suspend your benefits at 66 and resume collecting them at 68, you can expect your monthly check to be at least 16% higher.

There are a few things to consider before you suspend your benefits. For one thing, any other benefits (such as a spousal benefit) paid on your work record will also be suspended, which I'll discuss in more detail later. Also, if you suspend your benefits, you'll need to start paying your Medicare Part B premiums out of pocket.

You can suspend your benefits until as late as your 70th birthday. If you have not requested that your benefits resume before this time, they will be reinstated automatically.

If neither of these conditions apply, there may be another option

Unfortunately, if you're younger than your full retirement age and applied for Social Security over a year ago and for whatever reason, no longer want to collect benefits, there's not much you can do. For example, if you applied for Social Security benefits at age 62, and now you're 64 and wish you never applied, you'll need to wait until your full retirement age to officially suspend Social Security.

I say "officially" because one other way to effectively suspend your benefits before your full retirement age is by working more. Specifically, if you'll reach full retirement age after 2017, your Social Security benefits will be reduced by $1 for every $2 you earn above $1,410 per month ($16,920 per year). However, this isn't really a "reduction" at all. Rather, any benefits that are withheld due to your earnings can allow your future Social Security benefit to grow once you hit full retirement age and the "earnings test" no longer applies.

So, if you have not reached full retirement age, but stopped working early, it's possible to effectively suspend your benefits by going back to work full-time until you reach full retirement age. And if you want to continue delaying Social Security beyond that time, you can simply file to suspend your benefits as detailed earlier.

One thing to keep in mind

As a final thought, it's worth mentioning that before you choose to cancel your application or suspend your benefits, doing so also prevents other people from collecting a benefit based on your work record. Specifically, a spousal benefit can only be awarded if the primary worker is actively collecting his or her benefit, and the same is true for a benefit being paid to a dependent child. Stopping your Social Security benefit will stop any of these as well, so keep this in mind before you make your decision.

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