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An early Social Security claim gives you access to your money sooner, but it comes at a steep price.
Payments can be started from age 62 to 70. If you start getting checks ahead of your full retirement age (between 66 and four months and 67), payments will be up to 30% smaller due to early filing penalties. And you’ll miss out on any chance of earning delayed retirement credits that increase your standard benefit.
A big cut to your monthly Social Security check could cause financial pain later in life. While Social Security benefits aren’t ever enough to live on (they replace only 40% of pre-retirement income) many people rely on these benefits more than they should. And if you’ve shrunk benefits that are already too small, you might really regret it.
The good news is, there are options to boost your benefit even after an early claim. Here are three of them.
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1. Go back to work
Returning to work could potentially help raise the amount of your Social Security check in a few different ways.
First and foremost, if you’re under your full retirement age (FRA) and earn enough money, working could actually cause you to temporarily forfeit Social Security income. While it may sound bad to forfeit benefits, this approach essentially involves reducing or stopping benefits in the short-term in order to increase your future checks.
See, if you earn more than $19,560 in 2022 and won’t hit FRA at all during the year, you’ll lose $1 in benefits for every $2 extra earned. If you’ll hit FRA at some time during 2022, you lose $1 in benefits for every $3 earned above $51,960. The thresholds when you begin losing benefits change each year but the amount lost after exceeding them remains the same.
The Social Security Administration withholds entire monthly checks to account for the benefits you forfeit. That’s the bad part. But, when you have checks withheld due to working, your future payment is subsequently recalculated at FRA. You’re credited back early filing penalties that otherwise would have applied. In other words, each month you don’t get a check, your future payments increase because some penalties disappear. You can reduce or eliminate early filing penalties with this approach, giving you more Social Security income later in life.
You can also raise your benefit by working if you increase the average wages your benefits are based on. The Social Security Administration bases your standard benefit on the amount you earn in the 35 years when your inflation-adjusted wages were highest. If you earn more after going back to work than at an earlier point in your career, each extra year of high earnings will push out a lower-earning one from the average-wage calculation. This increases benefits you receive.
2. Rescind your benefits claim
If it’s been less than a year since you filed for Social Security benefits, you have the option to rescind your claim.
This is essentially like requesting a do-over. You pay back all the benefits that were paid out as a result of your initial claim and then it’s like the claim never happened.
Having to repay all benefits paid out can be a big financial burden. But if taking this approach allows you to avoid early filing penalties and potentially cash in on delayed retirement credits, you could end up with a much higher monthly income later.
3. Suspend your benefits
Finally, if you’ve already reached full retirement age, you could ask to suspend your benefits. Payments would stop coming until age 70 (or until you asked to restart them) and you could begin earning delayed retirement credits that increase monthly income.
These three approaches all allow you to raise your future Social Security even if you’ve claimed benefits early. While they could mean sacrificing in the short term, they’re well worth looking into if you’re worried that you won’t have financial security without a higher retirement benefits check later in life.
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