An early Social Security claim allows you to access your money sooner, but it comes at a high cost.
Payments can begin at any age between 62 and 70. If you begin receiving payments before reaching your full retirement age (between 66 and four months and 67), payments will be reduced by up to 30 percent due to early filing penalties. You’ll also miss out on any opportunity to earn delayed retirement credits, which would increase your standard benefit.
A significant reduction in your monthly Social Security check could result in financial hardship later in life. While Social Security benefits are never enough to live on (they only replace 40% of pre-retirement income), many people rely on them far too much. And if you’ve already reduced benefits that are already too small, you may come to regret it.
The good news is that there are ways to increase your benefit even if you have already filed a claim. Here are three examples.
1. Return to work
Returning to work may help increase the amount of your Social Security check in a variety of ways.
To begin with, if you are under your full retirement age (FRA) and earn enough money, working may cause you to temporarily forfeit Social Security benefits. While it may sound bad to forego benefits, this strategy entails temporarily reducing or discontinuing benefits in order to increase your future checks.
For example, if you earn more than $19,560 in 2022 but do not meet FRA during the year, you will lose $1 in benefits for every $2 extra earned. If you reach FRA in 2022, you will lose $1 in benefits for every $3 earned above $51,960. The thresholds at which benefits begin to be lost change each year, but the amount lost after exceeding them remains constant.
The Social Security Administration deducts the full amount of your monthly check to account for the benefits you do not receive. That is the unfortunate part. However, if you have checks withheld due to working, your future payment is recalculated at FRA. Early filing penalties that would have otherwise applied are credited back to you. In other words, if you don’t receive a check each month, your future payments will rise because some penalties will be waived. With this method, you can reduce or eliminate early filing penalties, giving you more Social Security income later in life.
You can also increase your benefit by working if you raise the average wage on which your benefits are based. The Social Security Administration calculates your standard benefit based on the amount you earned during the 35 years with the highest inflation-adjusted wages. If you earn more after returning to work than you did before, each additional year of high earnings will push a lower-earning year out of the average-wage calculation. This increases the amount of benefits you receive.
2. Cancel your benefits claim.
You have the option to rescind your claim if it has been less than a year since you filed for Social Security benefits.
This is essentially the same as asking for a do-over. You repay all benefits paid out as a result of your initial claim, and it’s as if the claim never happened.
Having to repay all benefits received can be a significant financial burden. However, if taking this approach allows you to avoid early filing penalties and potentially cash in on delayed retirement credits, you could end up with a significantly higher monthly income later on.
3. Put your benefits on hold
Finally, if you’ve already reached full retirement age, you can request that your benefits be suspended. Payments would cease until you reached the age of 70 (or until you requested that they be resumed), and you would be able to begin earning delayed retirement credits, which would increase your monthly income.
These three approaches all allow you to increase your future Social Security benefits even if you’ve already claimed them. While they may entail short-term sacrifices, they are well worth considering if you are concerned that you will not have financial security without a higher retirement benefits check later in life.