2 Little-Known Social Security Rules Everyone Should Know Before Turning 62

One of the most important decisions in your retirement planning is when to apply for Social Security benefits.

Most people can start claiming Social Security benefits at age 62. There are many good reasons to claim as soon as possible, but there are just as many, if not more, reasons to wait. The main benefit of waiting to claim Social Security is an increase in your monthly benefit. If you wait until age 70, you’ll get a monthly check that’s about 77% higher than if you claim at age 62.

To complicate matters further, your decision to claim Social Security benefits is inherently based on your expectations for the future. Unfortunately, most people don’t have a perfectly clear crystal ball, and the future rarely turns out as expected. And when circumstances change, we may want to reconsider one of the most important decisions in all of retirement planning.

Fortunately, the Social Security Administration (SSA) understands the importance of deciding when to claim your benefits, and the program offers some leniency. But you need to know the rules to take advantage of them. Here are two important Social Security rules everyone should know before turning 62.

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You can press the reset button

One rule that could completely save your retirement savings is the ability to withdraw your claim within one year of originally applying for Social Security benefits.

If you make a mistake, realize you filed too early, and realize it in time after you’ve started receiving benefits, you can easily hit the reset button. All you have to do is file Form 521 with the SSA.

However, if you really want to get everything back together, you’ll also have to pay back everything you’ve received from Social Security up to that point. This includes monthly benefits, plus any amounts withheld from your check, such as Medicare premiums or taxes, if applicable. The SSA will tell you exactly how much you’ll have to pay back when it sends you approval to withdraw your claim.

The obligation to repay can be quite a burden for some retirees. If you applied for Social Security benefits because you needed the extra income, but your circumstances change and you find you no longer need it, you may not have the cash to repay your original benefits.

If you realize that you cannot repay the benefits or simply change your mind, you have 60 days to cancel an approved payout.

The “reset button” is just that. It’s as if you never applied for benefits. If you successfully withdraw your application and repay your benefits, your future monthly benefit will increase for each month you delay applying for benefits.

Another important caveat to withdrawing your Social Security claim is that it is a one-time option, and if you apply again in the future, you will not be able to reapply.

The good news is that anyone can use the second rule to mitigate the effects of filing early.

What to do if you cannot withdraw your application?

If the deadline to withdraw your application has passed or you can’t afford to repay your benefits to complete your withdrawal, you still have another option. You can suspend your benefits when you reach full retirement age (or later).

Your full retirement age is likely to be between 66 and 67. Anyone born between 1943 and 1954 reaches full retirement age at 66. Your full retirement age increases by two months for each year you were born after 1954, until it peaks at 67 for anyone born in 1960 or later.

When you suspend your benefits, you begin accruing delayed retirement credits. These credits increase your monthly benefit by 2/3 percentage points for each month you defer until age 70. That means someone with a full retirement age of 67 can increase their monthly check by 24% by suspending their benefit for a maximum of three years. You’ll also receive a boost from the annual cost-of-living adjustment (COLA), which will further increase your benefit.

However, it’s important to remember a few details. If you suspend your benefits, it means that anyone who receives benefits based on your income records will no longer receive those benefits. A spouse will resume receiving benefits based on their own records (if they are eligible), and an eligible child may no longer receive anything. It’s important to keep in mind how your decision will affect the income of the entire household.

Additionally, if you’re enrolled in Medicare, the SSA will automatically withhold your Part B premiums from your Social Security checks. However, if you stop receiving Social Security benefits, you’ll be responsible for paying Medicare premiums directly. Make sure you factor this into your budget. Medicare Part B premiums will start at $174.70 per month in 2024.

Finally, you can resume and suspend your payments at any time before age 70. Your benefits will automatically resume at age 70, unless you have already resumed them.

Be willing and able to change your strategy

Your circumstances often dictate when you claim benefits. But when those circumstances change, it’s important to be able to adapt. Knowing the rules above will help you make the most of a change in your circumstances.