Withdraw From Social Security

By John V. W. Howe

We are not talking about a crazy protest against the Social Security (SS) system. We are talking about a strategic move to increase your Social Security benefits.

Let's say you started receiving your benefits at age 62 and then you realized you should have waited until your full retirement age so you would receive the full retirement benefit or the maximum available benefit at age 70.

Well, there is a way to recover from starting benefits early. This will allow you to receive benefits at 62 and then upgrade your benefits to the full retirement age or to age 70.

The SS has a form to withdraw from SS. You file a Form 521 (Application to Withdraw) to request that your previous application for Social Security benefits be withdrawn. You have to pay Uncle Sam back the benefits you were previously paid, but you pay them back with inflated current dollars with no interest. You then reapply when you reach the next age for increased benefits (full retirement age or 70 years).

This takes a large lump sum, but depending on several factors, this move makes a lot of sense to maximize social security benefits. This is especially true if you expect to live to a ripe old age to take advantage of the higher benefit payment. This transaction is equivalent to purchasing an annual inflation-indexed annuity equal to the difference between the benefits received at age 62 and the benefits you will receive at the age when you reapply (full retirement age or at age 70). You will not find a less expensive inflation-indexed annuity on the market.

Let's take an example of a couple who both just turned 70 who learn of this technique and decide to see if it will work for them. They both began drawing their SS benefits at age 62. Each of them collected $11,555 annually.

At age 70, they are still in good health and when they check their projected longevity on the various Internet longevity calculators, their projected age of death was near 90. If they had waited until age 70 to start collecting their benefits, each would receive $20,000 per year or an annual increase of $8,445 which is a substantial increase in benefits.

To realize this benefit increase, each will have withdraw from Social Security and pay back $71,410. This is less than they actually received, but their Medicare benefits were deducted from their SS payments and they plan to maintain their Medicare coverage.

They each complete and submit their Form 521. Social Security notifies them of the amount they must pay back and they pay it back. They then have 60 days to cancel an approved withdraw. This gives them the opportunity to back out if it appears this is not a good choice.

The move to withdraw from Social Security will not be for everyone, but for some, this will result in a major increase in their living standard in retirement.

For more information about ways to maximize your social security, read the resource information at the end of this article.

About the author: John V. W. Howe is a husband, father, and grandfather. He has developed several websites to help retirees (or soon to be) plan for retirement. His website http://www.frugal-senior.com helps retirees maximize their retirement income and reduce their retirement expenses. All seniors must be frugal seniors in our current economic times.

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