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YOU RAISE YOUR SOCIAL SECURITY INCOME BY $1,000 A MONTH?
How filling out Form SSA-521
could help you put more money in your mailbox.
provided by Gregory M. Montagna, CPA, CFP
A couple of years ago, Boston University
economics professor Laurence Kotlikoff publicized a mind blowing discovery: retirees
could dramatically increase their Social Security checks by reapplying for
Social Security benefits.
It was entirely legal; it was an opportunity
that had lay unnoticed for years. It was soon discussed on National Public
Radio and PBS, and in USA Today and a
number of in financial magazines. Let's discuss it here.
Hit "restart" and reset your RIB.
Everyone eventually applies for Social Security, but few people reapply ? and
that's the key to this strategy, which can potentially bring retired couples
$1,000 or more in additional RIB (retirement income benefits). Kotlikoff calls
it "restarting the Social Security clock". If you are in good health and have
retired within the last few years, it is a move worth considering.
You can start collecting Social Security
benefits when you're first eligible, and then restart your payments at a higher rate
later. You simply file Form SSA-521 (www.ssa.gov/online/ssa-521.pdf) to request
a withdrawal of your Social Security application. After the SSA processes that
form, you reapply for Social Security ? and since you are older now than when
you first applied, this time you will receive much higher payments.1
So if you think you applied for Social
Security too soon, this presents you with a remedy, as Kotlikoff noted while
presenting a hypothetical example to the
Los Angeles Times in 2009.
Take the case of a 70-year-old husband and
wife, he noted. In 2009, they each would have received $13,250 in benefits if
they had started taking Social Security at age 62. But if they had waited to
apply for Social Security until 70, they each would get $20,692 annually. Instead
of $26,500 in combined monthly benefits, they could get $41,384 ? 36% more.1
That's a pretty good case for hitting
the catch? If you want to
restart your Social Security benefits at a later age, you have to repay the
Social Security benefits you have already received. But you don't have to pay
interest on that money.1 Basically, you're repaying an interest-free
loan from Uncle Sam.
Now if enough people do this, there is the
risk that the federal government may say, "Wait a minute ? look at all these
people exploiting this opportunity." But very few retirees do.
If you do reapply, there's nothing fishy
about it. Visit your local Social Security office (make an appointment by
calling 1-800-772-1213). Bring Form SSA-521 with you, or ask for it and fill it
out while you are there. Don't be surprised if the person on the other side of
the desk doesn't know what you?re talking about when you mention reapplying for
benefits. So bring a copy of the formal SSA explanation (www.ssa.gov/OP_Home/handbook/handbook.15/handbook-1515.html)
Once you repay your benefits, you can
restart them whenever you want. If you fill out Form SSA-521 and hand over a
check repaying the money you've received, you can reapply for benefits right
then and there - the request is routinely approved.3
For the record, Form SSA-521 only allows you
to check one of two boxes for why you want to reapply for benefits. The first
is "I intend to continue working" and the other is "Other (please explain
fully)".4 Mickie Douglas, a spokeswoman with the Social Security
Administration, told Financial Advisor
Magazine that it is entirely legitimate to write down that you are reapplying
because it is "financially better for you".5
risks do I run by doing this?
The big risk is that you could die soon after you repay your benefits - you
could be out, say, $50,000 or $60,000 without living long enough to enjoy much of
the additional income. But survivor benefits would be larger for your spouse,
of course. Speaking of spouses, widows and widowers cannot employ this strategy
to reapply for a deceased spouse's benefits.5
this a good move for you?
It might be. In case you are wondering, Kotlikoff is no hack - he holds a Harvard
Ph.D. in economics and is a former member of the President's Council of Economic
Advisors. He knows his stuff, and so should you. If you have the money to repay
a lump sum equivalent to the benefits you have received, this may be a great
move ? but talk with your financial or tax advisor to see how this decision affects
your overall financial strategy.
Gregory M. Montagna, CPA, CFP is a
Representative with 1st Global Advisors and may be reached at www.montagnainc.com,
(949) 833-2371 or firstname.lastname@example.org.
These are the views of Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be
construed as investment advice. Neither the named Representative or Broker/Dealer give tax or legal advice. All
information is believed to be from reliable sources; however, we make no representation as to its completeness or
accuracy. Please consult your Financial Advisor for further information.
1 articles.latimes.com/2009/nov/01/business/fi-perfin1 [11/1/09]
4 ssa.gov/online/ssa-521.pdf [7/03]
Securities offered through 1st Global Capital Corp., Member NASD/SIPC