Should You Reset Your Social Security Benefits?

You may have recently heard about how you can reset your Social Security benefits. Here’s how it works:

  1. You stop your benefit payment
  2. Pay back all you received
  3. Receive a higher benefit when you resume payments.

Social Security has proposed doing away with this option. So you’ll need to consider your options now.

Generally you may begin Social Security payments at age 62 for a reduced benefit relative to your “normal” retirement age. Delaying past 62, perhaps all the way to age 70, yields a higher monthly payment for the rest of your life. If you live long enough, you collect more in benefits thus making the reset strategy (for those receiving benefits) worthwhile for some. You’ll need to file a reset request (SSA Form 521) with Social Security. If you began benefits at age 62 the payback—that is, out of pocket amount—could be substantial.

Is this a good deal? The break-even point varies, but if you reset or delay benefits until age 70 you won’t come out ahead until you hit age around age 84. So—you’ve got to ask yourself one question: Do I feel lucky? Well, do ya?

Dying before the break-even point means you could have received more in benefits and gotten to enjoy spending this income while you were young, hip and retired. Not everyone slows down in older age, but many do.

When thinking about starting or resetting Social Security, consider the enjoyment a smaller benefit can bring now. Starting benefits early may give you just the income boost you need to take a trip, start a hobby or do something else—anything you enjoy.

About the author

Eric J. McClain, CFP®

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