Did You Know You Can Start, Stop and Then Restart Social Security?

As the U.S. entered this recession, the unemployment rate hit a record high. Workers have been laid off or furloughed as businesses closed due to the coronavirus. With payrolls down, the benefits that Social Security offers could be more important than ever to a growing number of people near retirement whose incomes are being impacted.

It’s impossible to know exactly how this recession will impact our economy long term, but we do know it might be impacting how retirees strategize their benefits. Depending on your unique situation, you might find yourself turning to one of these claiming strategies:

Enrolling in Benefits Early

If you’re 62 or older and faced with an unexpected job loss, you need to figure out if you will retire early or look for another job. Will you start taking Social Security, or will you tap into your retirement savings for income?

If you do decide to start taking Social Security early, you need to understand that your benefit will be permanently reduced if you claim before your full retirement age, which is somewhere between 66 and 67. For those who turn 62 in 2020, full retirement age is 66 and 8 months.

Because of the permanent reduction in benefits, we usually recommend waiting to claim Social Security until full retirement age or later … but if you need the income, taking Social Security early might be a good option.

Take Your Social Security Benefits, but Reserve the Right to Change Your Mind Within 1 Year

You are allowed to withdraw your Social Security benefits after enrolling. If you start taking Social Security before full retirement age and then find another job, you might decide to withdraw your benefits, or else you’ll face a reduced monthly check if you earn too much. You can withdraw your benefits within the first year of claiming Social Security, no matter what your age. You must pay back any money you received; the Social Security Administration then treats it like you never enrolled, and your monthly check can continue to grow until you start taking benefits again.

Here’s an example of when this might make sense: Let’s say you're suddenly laid off at age 62 and decide to start taking Social Security to help make ends meet. You then meet with a financial adviser, who helps you come up with a plan for income, and you decide a few months later to withdraw your benefits. You can withdraw your benefits, pay the money back and allow your future benefit to grow as if you never enrolled in the first place.

To withdraw your benefits, you must fill out a special form from the Social Security Administration, stating the reason for your withdrawal. You will mail the form, and the Social Security Administration will notify you if you are approved. You have 60 days from the approval to cancel your withdrawal. It’s important to note you can only withdraw your benefits one time.

Suspending Your Social Security Benefits

If you are not eligible to withdraw your benefits because it has been longer than 12 months since you enrolled, but you are between full retirement age and age 70, you can voluntarily suspend your benefits.

Let's say you enroll in Social Security at age 64, find a new job at age 66 and decide to delay retirement. If 66 is your full retirement age, you can suspend your benefits until age 70, and your future payments will continue to grow. Thanks to delayed retirement credits, your benefit will grow by 8% each year it’s suspended. Remember, it doesn’t make sense to delay taking Social Security past age 70 because your benefit stops growing.

To suspend your benefits, you must make a request to the Social Security Administration by phone, in person or in writing. If you want to turn your benefits back on before age 70, you also need to contact the Social Security Administration orally or in writing. Otherwise, your benefits will be automatically reinstated in the month you turn 70.

Social Security is complex, and it can get even more overwhelming if you find yourself in a position where you want to suspend or withdraw your benefits. This is why you need to talk with a financial adviser as you are preparing for retirement. A professional can help you find the right Social Security strategy for your unique situation, create a comprehensive plan and make adjustments for the unexpected.