Social Security’s Little-Known Do-Over Option Could Get Retirees a Bigger Benefit

The best age to claim Social Security benefits depends on personal circumstances. That said, studies have consistently shown that most retirees with normal life expectancies will maximize lifetime spending power by claiming benefits at age 70.

Yet few people wait that long. Last year, over 90% of newly awarded workers began receiving Social Security benefits before age 70. In fact, almost 25% of newly awarded retirees started Social Security as soon as possible (age 62), meaning they locked in for life the smallest possible benefit based on their personal earnings history.

Some workers naturally come to regret claiming Social Security early. Fortunately, a little-known rule allows undoing claiming decisions in certain situations.

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Claim age is a critical factor in calculating Social Security benefits

Social Security benefits are based on lifetime earnings and the age at which benefits are claimed. A formula is applied to the inflation-adjusted earnings from a worker’s 35 highest-paid years of employment to determine their primary insurance amount (PIA). The PIA is the benefit they will receive if they start Social Security at full retirement age (FRA).

However, some workers choose to start earlier, while others choose to start later. So the PIA is adjusted based on the claim’s age. Workers who claim Social Security before FRA get a smaller benefit, meaning less than 100% of the PIA. Workers who claim Social Security after FRA get a larger benefit, meaning more than 100% of the PIA.

There are two limits to those rules. Eligibility for retirement benefits begins at age 62, so no one can claim earlier. Similarly, delayed retirement credits stop accruing after age 70, which means it never makes sense to claim later.

The table explains the relationship between birth year and FRA. It also shows the Social Security benefit a retired worker will receive (as a percentage of PIA) if they claim at ages 62 and 70. In other words, it shows the smallest and largest payouts for people in each age group.

Data source: The Social Security Administration. Percentages have been rounded to the nearest one-tenth of a percent.

As shown, retirees born in 1960 or later will receive only 70% of their PIA at age 62 but 124% of their PIA at age 70. Put differently, retired workers in that age cohort can increase their benefit by 77% (i.e., 124 divided by 70) by simply claiming Social Security at age 70 rather than age 62.

Naturally, some people who start receiving benefits before age 70 come to regret the decision. Fortunately, a little-known Social Security rule lets workers undo their claiming decision in certain situations.

Social Security’s little-known do-over can help some retirees increase their benefits

In certain cases, retirees who regret claiming Social Security early can cancel or withdraw their application by completing Form SSA-521, provided they meet the following criteria:

• Claiming decisions can only be undone once.
• Claiming decisions can only be undone within 12 months of approval.

There are other stipulations as well. Retired workers who cancel or withdraw their benefit applications must repay every cent they have received from Social Security. That includes any spousal benefits collected on the retired worker’s earnings record. It also includes any money automatically withheld from benefit checks to cover Medicare premiums.

Social Security’s do-over option completely erases the decision to claim benefits. That means it wipes away any benefit reduction incurred for claiming before FRA and instead lets retirees earn delayed retirement credits that increase their payout by two-thirds of 1% each month (8% per year) if they claim after FRA.

In the most extreme scenario, retired workers who reverse a claiming decision could increase their benefit payments by 77% by delaying Social Security until age 70 rather than claiming at age 62.

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