Claimed Social Security Too Early? This Lesser-Known Rule Could Help You Avoid a Lifelong Reduction in Benefits.
Key Points
Filing for Social Security before full retirement age could reduce your benefits for life.
If you undo your filing quickly enough, you can avoid a permanent reduction.
While you have an out in this situation, there's one requirement that may trip you up.
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If you file for Social Security at full retirement age, which is 67 for people born in 1960 or later, you get your complete benefit payment each month without a reduction. But not everyone waits that long.
You're allowed to sign up for Social Security at any time once you turn 62. And it can be very tempting to claim benefits early, especially if that allows for an early retirement.
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But sometimes, people claim Social Security ahead of full retirement age and regret it when they see how much smaller their monthly checks are. If that happens to you, you should know that you're not necessarily doomed to a lifetime of lower benefits. But if you want to avoid that fate, you'll need to act quickly.
You get a do-over
One little-known rule about Social Security is all claimants are entitled to a single do-over when it comes to taking benefits.
If you filed for Social Security early but now regret it, and you're within 12 months of starting benefits, you can withdraw your application and file again at a later point in time. And if that later point in time is full retirement age, you won't have to worry about a lifelong reduction in benefits.
However, there's a catch. To take advantage of the do-over option, you also need to repay the Social Security Administration all of the benefits it paid you since you filed. If you've already spent that money, and you don't have savings to dip into to pay it back, then you may not be able to undo your claim.
But let's say you get your first Social Security check and you realize you're not happy with it. If you don't spend it, repay it, and withdraw your benefits application right away, you can get a second chance to file for Social Security at a later age.
Think through your decision carefully
While it's a good thing that all Social Security recipients get a do-over option, a better bet is to get your filing decision right the first time around. So before you claim Social Security, think carefully about the pros and cons of filing at that time. And also make sure to run the numbers to see what sort of reduction in benefits you may be facing if you'll be filing early.
Remember, Social Security may be the only income source you have that's guaranteed for life. And while claiming benefits early isn't always a mistake, if that's where you're leaning, it's important to think things through carefully before locking that decision in.
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