A little-known strategy that allows Social Security recipients to boost their income may soon disappear. Now, if you repay benefits you received in earlier years, you're eligible for a do-over -- and can claim a bigger monthly check based on your older age. If you or someone you know might benefit from the payback strategy, now's the time to consider it -- before the government eliminates the opportunity.
Retirees may collect Social Security benefits as early as age 62, but their monthly payments are reduced by 25% compared with what they would have received at the normal retirement age, which is 66 for those who claim benefits this year. If you're willing to wait past age 66, you can boost your benefits by 8% for every year you delay up to age 70, increasing annual benefits to 132% of their base amount.
Say you decided to collect early, but now you wish you were getting bigger monthly checks. First you must file Form 521, "Request for Withdrawal of Application," at your local Social Security office. Your retirement benefits will stop immediately, and if your spouse receives benefits based on your work record, his or her benefits will stop, too. Then the Social Security Administration will send you a letter telling you how much you need to repay (including any spousal benefits). That process may take several weeks or even months. Once you repay the benefits -- which could top $100,000 -- you may reapply for a higher payment based on your current age, locking in a larger base amount for future cost-of-living adjustments and maximizing lifetime benefits for a surviving spouse.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Second thoughts. The strategy has gained popularity as retirees realize that it is cheaper to repay Uncle Sam interest- and penalty-free and lock in inflation-adjusted payments for life than it is to buy a similar amount of guaranteed income with an annuity. But SSA officials could close this unintended loophole as early as next year.
Under a proposed rule, retirees would be allowed to withdraw an application for Social Security benefits only once during their lifetime and only within 12 months of when benefits began. If you changed your mind within the first year, you could stop your benefits, pay back what you'd already received and restart your benefits later at a higher level. But once the 12-month deadline passed, you would no longer be able to repay benefits to "buy" a higher benefit later.
-
Investors Buy the Nasdaq's Big Dip: Stock Market TodayStocks are up and down again to end an up-and-down week ahead of big earnings announcements and the eventual return of regular economic data flow.
-
What to Know About Portable MortgagesA closer look at how portable mortgages would work, who might benefit and why the concept is gaining attention amid high rates and limited supply.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
457 Plan Contribution Limits for 2025Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025. That's good news for state and local government employees.
-
Medicare Basics: 12 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
The Seven Worst Assets to Leave Your Kids or Grandkidsinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2025SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $70,000 in 2025, up from $69,000 in 2024.
-
Roth IRA Contribution Limits for 2026Roth IRAs Roth IRAs allow you to save for retirement with after-tax dollars while you're working, and then withdraw those contributions and earnings tax-free when you retire. Here's a look at 2026 limits and income-based phaseouts.
-
SIMPLE IRA Contribution Limits for 2026simple IRA For 2026, the SIMPLE IRA contribution limit rises to $17,000, with a $4,000 catch-up for those 50 and over, totaling $21,000.
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
