Reapplying for Social Security

What if you decide to apply for early Social Security benefits, but a few years into retirement, realize that a higher Social Security benefit would help you increase, and sustain, your standard of living? Fortunately, you're not necessarily locked into your decision to take your retirement benefit early. The Social Security Administration (SSA) allows you to withdraw your benefit application and reapply later if that would be to your advantage.

Why reapply?

Increasing your monthly Social Security retirement benefit is one of the main reasons you might want to withdraw your application and reapply. According to the SSA, most retirees file for Social Security benefits early, often at age 62. But the drawback to claiming benefits early is that your monthly benefit will be substantially less than it would be if you wait until full retirement age, or longer, to collect. For example, if your full retirement age is 66, your monthly benefit at age 62 will be approximately 25% less than it will be if you wait until your full retirement age of 66 to collect, and 43% less than if you wait until age 70. (Source: SSA chart, Effect of Early or Delayed Retirement on Retirement Benefits)

Once you have a clearer picture of your retirement income needs, you may decide to withdraw your initial application and reapply when you're older, so that you may receive a higher monthly Social Security benefit (adjusted annually for inflation) for the rest of your life. In addition, if you're married, your spouse will generally receive the greater of his or her own retirement benefit or your monthly benefit (including any cost-of-living increases) in the event of your death, so increasing your retirement benefit may translate into more survivor protection for your spouse.

You may also wish to withdraw your Social Security application if you decide to work and your income is enough to reduce or even eliminate your Social Security benefit, or if your Social Security income is increasing your tax liability.

How do you do it?

You can withdraw your initial benefit application by filing Form SSA-521, "Request for Withdrawal of Application" at your local Social Security office. However, there is a pretty big catch. If you withdraw your application after you begin receiving benefits, you're required to return--in a lump sum--all of the money that Social Security has paid you over the years. But any interest or investment earnings you've received as a result of saving or investing those benefits is yours to keep. If you paid taxes on the benefits you're now paying back, you may be eligible for an income tax credit or a deduction. You can find more information about the tax consequences in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

There’s so much to consider

Not everyone will come out ahead by withdrawing an application for retirement benefits, then reapplying--you'll need to consider your own financial circumstances. Obviously, the requirement to pay back benefits will limit the number of people who can take advantage of this opportunity. And even if you can afford to pay back your benefits, you must be willing to accept the risk that if you die, you or your spouse may not recoup the amount you've paid back. But reapplying for benefits may be worth considering if you need to maximize your lifetime income and provide higher survivor's benefits for your spouse.