If you're eligible for Social Security, you can sign up to start getting benefits as early as age 62. But you won't be entitled to your complete monthly benefit, based on your personal income history, until full retirement age (FRA) arrives. That age is 67 if you were born in 1960 or later.
Of course, it can be very tempting to sign up for Social Security the moment you're able to. But for each month you claim Social Security ahead of FRA, your monthly benefit will be reduced. So if your FRA is 67 and you file as early as possible, you'll be looking at a monthly Social Security paycheck that's 30% lower than what it could be.
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If you rushed to claim Social Security as soon as you could, you may be regretting that decision, now that you see how tiny your monthly paycheck is. But don't stress just yet. There is a way to score a higher monthly benefit, even after you've filed. You'll just need to act quickly.
When you get a second chance
One lesser-known Social Security rule is that filers get a single do-over option in their lifetime to withdraw an application for benefits and sign up again down the line. This option could come in handy if you've claimed your benefits too early and regret the reduction that resulted.
There are, however, a couple of related rules you'll need to be aware of. First, to undo your Social Security filing officially, you'll have to withdraw your application for benefits, and this must be done within a year. Second, you'll have to repay all of the benefits you received from Social Security to be able to file again with a clean slate. And that may not be an easy thing.
However, one thing you can do if you want to take advantage of your single lifetime do-over is dip into your retirement savings to repay your Social Security benefits if that money has already been spent. By doing so, you may, depending on your assets and the market, lock in some losses on investments. But you'll also set yourself up with what could be a larger Social Security income stream for life. Since your monthly benefits are guaranteed, it may be more than worth it to raid your savings or lock in losses on investments.
Try to get your decision right from the start
Although it's clearly possible to undo a Social Security filing after claiming benefits, a more ideal scenario is to simply sign up at the right age from the beginning. So before you submit your application, ask yourself the following:
- Do I need my benefits right away?
- Do I know what monthly benefit I'm looking at if I file right now?
- Have I talked to my spouse or partner about my Social Security filing?
- Have I assessed my savings to see how reliant on Social Security I'm likely to be in retirement?
Running through all of these questions could make it so you never have to take advantage of Social Security's do-over option. And that's not a bad thing at all.
