Social Security Retirement Benefits: Rules You Must Know

When I talk to clients, they understand the fundamentals of Social Security retirement benefits, but they are not aware of the rules they need to know. In this educational video on Social Security retirement benefits, I want to talk about the options retirees could take if they already take Social Security retirement benefits but changed their minds. In other words, they want a do-over.

Why do retirees change their minds and want to collect their Social Security retirement benefits later? Depending on their date of birth, for every year they wait, their benefits increase by 8% annually until they reach age 70.

These options are also good for investors who are near retirement and want to understand more on Social Security retirement benefits rules so they can better plan for their future.

Option 1: Form SSA-521 - request for withdrawal of application

• This form allows you to withdraw your Social Security retirement benefits application if the Social Security Administration approves it. 

• You have 12 months to file Form SSA-521 after you begin receiving benefits. Don’t wait until the last minute to file the form. What happens if you write the address wrong or mail in the wrong form? If you know you want to withdraw your application, you should do it now.

• You must pay back all the benefits received and benefits of anyone received on your behalf, such as a spouse, dependent child, disabled adult, et cetera.
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Option 2: Suspend your Social Security benefits

• Here is the direct quote from the Social Security Administration website, “if you have reached full retirement age, but are not yet age 70, you can ask us to suspend your retirement benefit payments. By doing this, you will earn delayed retirement credits for each month your benefits are suspended, which will result in a higher benefit payment to you.”
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• You must be between full retirement age and age 70.

• Everyone’s full retirement age is different. Most of my clients’ full retirement age is 65 or 66 years old. For my wife and I, it’s age 67 because the full retirement age is based on our date of birth. Here is the full retirement age table directly from the Social Security Administration.
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Option 3: Retroactive Social Security retirement benefits. 

• This is not a do-over option because you have not received your benefits yet. This option is for those that have not collected Social Security retirement benefits but want to be retroactive. 

• What does this mean? For example, Mary's full retirement age is 66, and she will receive $1,000 a month if she chooses to collect at age 66. She is currently 66 and 4 months old; she went to the doctor, and the doctor says she only has a couple of years to live. She spoke to the Social Security Administration office, and they will give her a check for the 4 months and her monthly retirement benefit is $1,000 a month because she told them she wants to start her retirement benefits at age 66 and not her current age at 66 and 4 months old.

• Here is a direct quote from SSA.gov, “if you've already reached full retirement age, you can choose to start receiving benefits before the month you apply. However, we cannot pay retroactive benefits for any month before you reached full retirement age or more than six months in the past.”
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• Here is another quote from AARP, “if you apply one to five months after you reach FRA, you can get retroactive benefits in a lump sum for that number of months. If you file six months or more past full retirement age, you can get up to six months in back benefits. For example, if you claim benefits four months after you reach FRA, you can get payments for those four months. If you wait until a year after you hit full retirement age, you can get six months of retroactive payments, but not a full year.”
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The big downside is you lose the delayed retirement credits you earned when you want your Social Security retirement benefit retroactive.

As always, please confirm the information directly with the Social Security Administration office about your options, and talk to your financial professional about the pros and cons of each option.

I like talking to the Social Security Administration office and I have the IRS on speed dial. “Hi Siri, call the IRS.”

Thank you for watching. This is Tan, your trusted advisor.

Resources: 
Internal Revenue Service (IRS): 1 (800) 829 - 1040
Social Security Administration: 1 (800) 772 - 1213
Social Security Administration: ssa.gov