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Two little-known Social Security rules could bring bigger benefits to some retirees

Social Security is the cornerstone of many Americans’ retirement plans. According to an annual Gallup poll, 59% of retirees say their monthly benefit check is an important source of income. Therefore, it is extremely important for the majority of seniors to get the most out of the program.

But that’s easier said than done. Although all statistics point to delaying benefits as long as possible to maximize your lifetime Social Security income, very few seniors actually do that. According to the most recent data available, less than 10% of new Social Security applications in 2022 went to people age 70 or older. Meanwhile, the most popular claiming age is 62, the year in which most people become eligible for retirement benefits.

There are certainly cases where it makes sense to file a claim as early as age 62. For example, if you have a health problem that shortens your expected lifespan, it may make sense to file a claim sooner. In addition, if you need supplemental income to meet your basic needs, it may make sense to apply early. But most people will be better off if they wait to claim their benefits.

The good news is that there are two little-known rules that can help you maximize your retirement benefits, even if you’ve filed before. Here’s what you can do.

Two social security cards on top of a stack of cash.Two social security cards on top of a stack of cash.

Two social security cards on top of a stack of cash.

Image source: Getty Images.

1. Press the Undo button

If you apply for Social Security benefits early, but your circumstances change or you realize you don’t need the income, you may be able to withdraw your application. As long as you submit your withdrawal request within 12 months of your original benefit being approved, you can have your claim undone.

It will be as if you never applied for benefits in the first place. Your monthly benefit increases for each month you wait to file a claim, starting when you turn 62.

However, there are a few catches.

First, you must pay back all the money you and your family received from Social Security. That includes Medicare premiums and taxes withheld from your monthly check, if you had one.

That can be a challenge for someone who is already on a tight budget. If the government approves the withdrawal of your application, but you realize that you cannot repay everything you owe, you have an additional 60 days to cancel the withdrawal.

The second catch is that you can only withdraw or cancel your Social Security application once per lifetime. The Social Security Administration does not want you to use the program for short-term loans. If you reapply for benefits before reaching full retirement age, you are stuck with your decision.

If you have passed the deadline for withdrawing your application, if you cannot return the money received, or if you have already filed a second claim, you are not completely out of luck. You can increase your monthly benefit with another important social security rule.

2. Press the pause button

The second rule is not nearly as powerful as the ability to withdraw your request, but is much more accessible. You can stop your benefits as soon as you reach full retirement age.

Depending on your year of birth, your full retirement age is between 66 and 67. Those born between 1943 and 1954 have a full retirement age of 66. The full retirement age increases by 2 months for each year born after 1954, before reaching age 67 for those born in 1960 or later.

When you suspend your benefits, you will no longer receive a monthly check in the mail. In return, the Social Security Administration will add a little bit to your future checks. You will see your monthly benefit increase by 2/3 percentage points for each month that your benefit remains suspended, up to the age of 70. Someone with a full retirement age of 67 can therefore increase their benefit by a maximum of 24%. Your benefit checks will automatically resume at age 70, if you have not already resumed them.

Again, there are some pitfalls to watch out for.

First, anyone (other than an ex-spouse) receiving benefits on your file is now ineligible for those same benefits. So if you have a spouse or child who receives Social Security, because you also receive benefits, this could hinder your overall income. In most cases, in the long term this means that the benefit of the partner with the highest income is postponed.

The second pitfall is that you now have to pay the Medicare premiums out of pocket. The Social Security Administration automatically enrolls beneficiaries in Medicare and withholds premiums on monthly checks. But without a monthly check, there is no money to keep. You must pay immediately. Medicare Part B premiums start at $174.70 per month and increase based on income.

As long as you keep these pitfalls in mind, suspending your benefits when you reach full retirement age can be a smart move to boost your Social Security income.

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