Some financial advisers have lately recommended the strategy of filing a claim for Social Security retirement benefits, drawing benefits for several years and then withdrawing the claim while filing a new claim, thereby increasing the monthly benefit. You can do this but there is a big catch. You have to pay back all the benefits you received. I would be interested to know how many people have actually done this. I would bet it is a small number.
Social Security has decided that it does not want anyone using this scheme. They just sent over a proposal to the Office of Management and Budget seeking approval for the following:
Social Security has decided that it does not want anyone using this scheme. They just sent over a proposal to the Office of Management and Budget seeking approval for the following:
We propose to modify our regulations to establish a 12-month time limit for the withdrawal of an old age benefits application. We also propose to permit only one withdrawal per lifetime. These proposed changes would limit the voluntary suspension of benefits only to those benefits disbursed in future months.
This is overdue. It's basically an interest-free loan and results in a lot of unnecessary work by SSA.
ReplyDeleteAn alternative would be to keep the current rule in place but require that the beneficiary pay the prevailing interest rate on the funds returned to SSA. This practice would end in a flash should that happen.
Wouldn't be fair to make people pay interest, unless SSA would start paying interest on retro benefits people are owed.
ReplyDeleteWhy is it unfair? They had the use of the money for several years. This idea first surfaced in the WSJ a couple of years ago, and I daresay that those who have taken advantage of it a) can well afford to repay with interest and b) made more money by investing it in the first place.
ReplyDeleteAs for SSA paying interest on retro benefits, maybe, but it's apples and oranges. We're talking about the RIB crowd here, not the much smaller universe of DIB beneficiaries, who typically have years of retro benefits coming due to the slowness of the process. And frankly, given the deficits, I don't see that flying in the current political climate.
It's not a scheme. It is gambling. The media misinforms that this is getting one over on SSA. Suppose someone gets SS benefits for several years, then pays back those benefits by withdrawing so they can get a higher monthly benefit. What if the person dies the next day or soon after. Now they paid back all those benefits and have NOTHING! In that situation, SSA wins by getting all that money back! Withdrawing is a BAD idea, but not because it is getting one over on SSA but because some poor sap might take on a 2nd mortgage to pay back the benefits, and leave his/her spouse high and dry when they die soon after. I plan to collect SS benefits as early as possible. I'll enjoy the money more at a younger age compare to when I'm 80 and just sitting around watching TV in my rocker.
ReplyDeleteThis is needed because there is a man that comes in the office about every 6 months withdrawing his claim an then starting it again.He is a real Mr. PCACS. It is a real pain and then he is upset about Medicare since his wife was under his record and he withdrew and it messed up her medical benefits. Different cards issued with different BICS and NH. Not to have to see him anymore regarding this issue would really be a blessing.
ReplyDelete