Social Security is simple, right? You work. You retire. You collect your benefits. Simple -- until it's not.
The reality is that plenty of things about the popular federal program are more complicated. Here are three lesser-known Social Security rules you should be aware of.
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1. Social Security's "do-over"
Some people might think that once they begin collecting Social Security retirement benefits before their full retirement age (FRA), it's an irrevocable decision. However, that's not necessarily the case. The Social Security Administration (SSA) allows what amounts to a "do-over."
Let's suppose you want to retire at age 62. You begin receiving retirement benefits. A few months later, though, you become bored and return to working full-time. You'd love for SSA to quit sending your monthly checks so your benefits would increase. The good news is that you can.
If you change your mind about receiving benefits before reaching your FRA, you can cancel your application for up to 12 months after you become eligible for benefits. The only catch is that you'll need to repay all the money you've received from Social Security up to that point. SSA permits this "do-over" only once, so make sure you really want to exercise the option before withdrawing your benefits application.
2. Good news and bad news about retiring early and continuing to work
What if you retire early and decide to work again but don't do so in time to withdraw your Social Security benefits application? There's good news and bad news.
Let's start with the bad news that not everyone might realize. Your benefits could be reduced if you make too much money. SSA will "claw back" $1 for every $2 you earn above a specified limit if you're under your FRA for the entire year. The agency reduces your benefit by $1 for every $3 you earn above another limit during the year you reach your FRA. For 2024, the lower earnings limit is $22,320 and the higher earnings limit is $59,520.
Now for the good news. First, you won't lose out on the money that SSA takes back forever. Once you reach your FRA, your benefits will increase as the agency pays all the money it withheld back to you. Second, if you make more money while working than you did earlier in your career, your benefits could be revised upward. SSA uses the 35 years with your highest earnings to calculate benefits. If any of those years are while you're receiving retirement benefits, they still count.
3. Spousal benefits not increased by holding off past FRA
Most retirees probably know that their Social Security retirement benefit will be increased if they delay collecting benefits past their FRA (up until age 70). However, some might not realize that holding off past their FRA will not increase the benefits of a spouse whose benefits are based on your earnings history.
The important thing to understand is that such spousal benefits are based on the primary insurance amount of the higher-earning spouse. This primary insurance amount is the benefit a person would receive at their FRA. Delaying claiming benefits beyond the FRA doesn't boost spousal benefits. (It does, however, increase survivor's benefits if the higher-earning spouse dies.)
Keep in mind that all of this is only applicable when a spouse's benefits are based on the other spouse's earnings history. This only happens when the spouse's benefits based on their own earnings are lower than the benefits they'd receive based on the earnings history of their spouse.
