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Article_Opinion, Insurance

Social Security lets you change your mind

Trading lower benefits today for higher benefits later is always a good idea

11/22/2020 6:04:00 AM

OPINION: It's always better to delay taking your Social Security benefits, Alicia Munnell writes. Here's why:

Trading lower benefits today for higher benefits later is always a good idea

The answer varies depending on whether the worker is above or below the full retirement age — currently 66.Those who have reached the full retirement age, but are not yet 70, can ask Social Security to “suspend” their monthly benefit payments. By doing so, they will earn a delayed retirement credit for each month of suspension, which will result in higher benefits once they choose to resume payments. If they have not already restarted their benefits sooner, benefit payments will automatically begin again at age 70.

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Those who have not reached age 66 have two options. In the first 12 months after becoming entitled to benefits, workers can simply cancel their application and repay any benefits received to date. This process is called a “withdrawal.” Workers are limited to one withdrawal per lifetime.

The second option for those who are returning to the labor force is the earnings test. Under this test, which is applied automatically, monthly benefits are reduced to the extent that workers’ earnings exceed annual thresholds. In 2020, a beneficiary is subject to a reduction of $1 in benefits for every $2 of earnings above $18,240, and $1 for every $3 of earnings above $48,600. The $18,240 and $48,600 are adjusted each year to keep pace with national wage growth.

The most important, and least understood, aspect of the earnings test is that Social Security recomputes the monthly benefits for those affected when they reach their full retirement age. (The earnings test was eliminated for those over the full retirement age in 2000.) The subsequent increase in monthly benefits allows workers to recoup benefits “lost” because of the earnings test. So the earnings test is not a “tax”; it is a mechanism that allows workers to shift benefits from a period when they are earning money to a time when they are more likely to be retired.

The bottom line is that people have a number of options if they claim and then change their mind. If they go back to work, the earnings test takes care of things automatically — cutting benefits in the short term and raising them later. If people change their mind because they realize they have enough money to get by, they can withdraw their application before age 66 or suspend the benefits after 66.

Read more: MarketWatch »

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Depends on your longevity. A lot to be said for get it while you can! If you die before you can collect the administrators keep all of your payout. You’re basically hedging that you will live long enough to offset the difference in delaying. 95% only bad news( It is not ALWAYS a good idea. It can take as much as 12 YEARS for those monthly 'net' increases to equal the total distributions you didn't take by not starting earlier. This is especially important information for people who genuinely don't expect to live that long.

Man, someone just tweeted a tweet that is making me really pray that my 2 patent ideas are successful. God please do; if not I won't act like Pres. Trump. I will figure it out; but when its the truth, with facts, what can I do but move on? Systemic incentive for We The People to make 💰 if you die early. 🇺🇸 pride. Such a wunnerful idea 🤦‍♂️

The time value of money disagrees with you “marketwatch”... UNTIL THERE IS A PANDEMIC!! Because you’re helping reduce the government deficit