Social Security allows recipients to withdraw their original application for benefits and then refile at a later date. For individuals who filed, and started receiving payments earlier, this provides an option to pay back the funds they have withdrawn without paying interest of penalties. Once those funds are paid back they can file again later and receive benefits again, but at a higher rate, for as long as they live.
Also called the ‘reset’ option, this policy can make a significant difference in the benefit an individual receives. For example, if an individual starts payments at 62 rather than 66 the difference can be as much as $500 per month. If the person needs the payments at the earlier age they can go ahead and take them and then pay them back at the later point. From that point their benefits would increase as if the had waited from the beginning.
Concern over what some considered a “free loan” caused changes to this policy as of 2010. Today, you must suspend your payments within the first 12 months of receipt. Even though only a few seniors ever took advantage of the Do-Over option, it was felt that the costs to the system were excessive.
An alternative to a Do-Over is what is called the ‘Claim and Suspend’ option. In this case one spouse claims benefits and then immediately suspends them. Their spouse them collects spousal benefits while the first spouse’s benefits continue to grow. This is ideal when one spouse has reached retirement age before the other.
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