WORKERS AGE 62 AND older who have been laid off, furloughed, faced pay cuts or forced into early retirement have the option to sign up for Social Security. However, you get smaller monthly payments if you sign up for Social Security before your full retirement age, which is 66 for most baby boomers and 67 for everyone born in 1960 or later. If you were eligible for $1,000 per month at your full retirement age of 66, you will get just $750 per month if you begin receiving payments at age 62. These lower payments typically last for the rest of your life.
However, if you start Social Security payments early and later come to regret that decision, there are a couple of ways to boost your monthly payments. Here are three ways to increase your Social Security benefit after you have started payments:
- Pay it back.
- Suspend payments.
- Work longer.
Pay it Back
If you change your mind within 12 months of signing up for Social Security, you can repay all the money you and your family have received, without interest, and withdraw your Social Security application. You can then apply for Social Security payments again at a later date, and the monthly payments will then be larger due to delayed claiming.
“If your situation improves and you don’t need this money anymore, maybe you don’t want to be tied to this low benefit amount for the rest of your life,” says Joseph Matthews, an attorney and author of “Social Security, Medicare & Government Pensions: Get the Most Out of Your Retirement & Medical Benefits.” “You get one chance to withdraw the application, wipe the slate clean, and then you get the higher amount when you do claim.”
You can only withdraw your Social Security application once in your lifetime. If money was withheld from your Social Security checks to pay for Medicare premiums or taxes, you will also need to pay that amount back in order to withdraw your application. If you have been receiving Social Security payments for over a year, you are no longer eligible to pay back your benefit and start over.
If you are between your full retirement age, which is 66 for most baby boomers, and age 70, you have the option to suspend your Social Security payments. Suspending your payments allows you to earn delayed retirement credits that will increase your monthly payments by 8% for each year of suspension. You can restart your Social Security payments at any time, and they will automatically resume at age 70 at a higher rate if you don’t select another option.
“When you get to 66, you can voluntarily suspend your benefits, and if you start them again a year later you get 8% more,” says William Meyer, founder and managing principal of Social Security Solutions, a company that analyzes Social Security claiming strategies. If you delay payments for four years between ages 66 and 70, you can increase your monthly payments by 32%.
For example, consider a married couple where the husband is eligible for $2,500 and the wife is eligible for $2,000 per month at age 66. However, they elected to sign up for payments at age 62, so their payments were reduced to $1,885 and $1,508, respectively. They later want to boost their benefit and decide to suspend their payments for four years between ages 66 and 69. When they resume payments at age 70, their monthly payments will be $2,489 for the husband and $1,991 for the wife, which is almost the amount they would have qualified for if they first signed up for benefits at their full retirement age of 66, according to Meyer’s calculations.
The couple will come out ahead using this strategy if the couple lives to be age 82 or older. And when one spouse passes away, the surviving spouse will receive a larger monthly payment.
“It’s insuring against the risk that you will live a very long time,” says Gopi Shah Goda, a senior research scholar at the Stanford Institute for Economic Policy Research. “You will continue to receive those bigger benefits until you die.”
However, suspending your payments will also suspend payments based on your work record that are going to your spouse and children. If your Medicare premiums were previously deducted from your Social Security payments, you will get a bill for your coverage.
Social Security payments are calculated using the 35 years in which you earn the most. If you don’t work for at least 35 years, zeros are averaged into the calculation, bringing down your monthly payments. However, if you continue to work and earn more than you did in one of the 35 years used in your Social Security calculation, even after you retire and sign up for Social Security, your benefit will be recalculated to give you credit for the higher-earning year.
“Very often, people at retirement age are at the top of their earning potential, and by continuing to work, you are bumping up your lifetime average, which bumps up your Social Security benefit,” Matthews says. “You’re not going to double your Social Security benefit, but you can add a significant amount per month, and it adds up over the long term.”
Working and receiving Social Security benefits at the same time between ages 62 and 66 could cause your Social Security benefit to be temporarily withheld, but working after your full retirement age will not result in any benefit withholding.
The Social Security Administration recalculates your 35-year average every year and will automatically adjust your payments if additional earned income has increased the monthly benefit you are eligible for. However, only earnings of up to $137,700 in 2020 are used to determine Social Security payments. Earnings above that amount aren’t taxed by Social Security or factored into benefit payments.