How to reverse course on collecting Social Security

Sometimes individuals submit applications for Social Security retirement benefits but then have a change of heart. Perhaps they retired or perhaps they were laid off, but now a new opportunity has presented itself and they want to rejoin the workforce. Or perhaps they find retirement too boring and figure they might as well return to work. Or perhaps, sadly, a spouse has passed away and they are lonely or need additional income that the spouse previously provided.

So, what course of action can a practitioner recommend to a client who jumped on the early retirement bandwagon, began collecting Social Security before reaching full retirement age or the age 70 delayed-retirement date, and then looks around and decides he or she would have been better off postponing retirement and receiving a bigger monthly Social Security check down the road?

For practitioners, some avenues are available for assisting such a client, but time is of the essence.

Withdrawing a Social Security retirement application

Generally, individuals have up to 12 months to withdraw their Social Security application after becoming entitled to retirement benefits. This can only be done once. Once the application is withdrawn, the individual can reapply for Social Security at a future date.

The request to withdraw an application must be made in writing. Anyone who receives benefits based on the client’s application must consent in writing to the withdrawal. Additionally, all benefits previously received must be repaid. This includes:

  • Benefits received by family members;
  • Money withheld for Medicare premiums;
  • Money withheld for voluntary tax withholding; and
  • Money withheld for garnishments.

In order to withdraw an application, an individual files Form SSA-521, Request for Withdrawal of Application, with a local Social Security office. The Social Security Administration (SSA) will then notify the person when a decision is made about the request and, if the request is granted, will identify the amount of money that must be repaid. If the individual changes his or her mind again, he or she has 60 days to cancel an approved withdrawal.

Example: Beth was born on May 3, 1958, and her full retirement age is 66 and 8 months. After working as a nurse for 35 years and through the COVID-19 pandemic, Beth is exhausted and fed up with management. She fills out the SSA’s retirement paperwork to begin collecting Social Security as of Jan. 1, 2023. She’ll be age 64 and 7 months, which is 25 months before her full retirement age. After beginning her retirement, Beth meets with her tax accountant in April to discuss her 2022 tax return. She’s bored and misses her co-workers at the hospital. When she mentions this to her accountant, he tells her how much higher her monthly Social Security benefit would be if she waited and retired at her full retirement age. He also tells her that she can reverse her retirement decision by filing an application with her local Social Security office and paying back what she has already received, as long as the paperwork is filed within 12 months of when her benefits were approved. Beth thinks about it and decides that since longevity runs in her family, it makes sense to pay back what she has received and opt for the higher monthly payments she will receive in the future. In July 2023, she files Form SSA-521 with her local Social Security office. In September, the office approves Beth’s application to rescind her Social Security application and tells her the amount of the payments received that she must pay back in order to complete the recission.

If 12 months have passed and it is now too late to withdraw the Social Security application, or if the SSA denies the withdrawal request, an individual may be able to qualify for a different option, but only if he or she has already reached full retirement age.

Voluntary suspension of retirement benefit payments

A client who is receiving Social Security benefits and has reached full retirement age, but is not yet age 70, can ask the SSA to suspend his or her retirement benefits. The individual will earn delayed retirement credits for each month that benefits are suspended, which will result in higher benefit payments when the benefits subsequently start again. If benefit payments are suspended, they will automatically start again the month the individual reaches age 70, or earlier if the individual so requests.

Voluntary suspension of benefits begins no earlier than the month after the month of the request.

When an individual requests a voluntary suspension of benefits, others who receive benefits on the individual’s record will not be able to receive those benefits for the same period that the individual’s benefits are suspended, with one exception — a divorced spouse does continue receiving benefits. Additionally, a voluntary suspension of benefits means that any benefits received on someone else’s record will also be suspended. Reinstatement of suspended benefits are permitted the month after the request for reinstatement is received.

When Social Security benefits are suspended, the individual must pay Medicare Part B premiums directly if he or she is enrolled in Medicare Part B. These premiums cannot be deducted from suspended retirement benefits or from the individual’s suspended spouse or ex-spouse’s benefits. And premiums not paid in a timely manner can result in a loss of Part B Medicare coverage.

Finally, for individuals also receiving Supplemental Security Income (SSI) benefits, suspending retirement benefits will make the individual ineligible for SSI.

Practitioners should keep in mind the above information if a client regrets a decision to begin collecting Social Security retirement benefits and wishes to reverse it.

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