, December 17, 2010 7:31 am
I’m not sure if this is the beginning of other changes on the horizon for Social Security, but here’s one of those “deals” that’s just bit the dust. It’s the ability to pay back all the benefits you’ve received if you’ve decided that starting at age 62 wasn’t such a good idea and you want to get the higher Social Security benefit that’s available if you’d waited. It amounted to an interest-free loan from the Social Security Trust Fund and as of last week, the party is over.
As an example, in the past, if you started your benefit at age 62, getting $900 per month, you would have received $10,800 per year. At age 70, your benefit would be $1,500 per month, or $18,000 annually. So, you would have been able to send a check to Social Security for those eight years you got $900 per month ($86,400) and then start receiving the $1,500/mo. benefit going forward. There was no interest charged for anyone who chose the payback option. My calculations, of course, don’t figure in any cost-of-living increases. Under the new rules, a Social Security recipient can withdraw an application for benefits only within the first 12 months of the first payment. Moreover, only one such withdrawal will be permitted during our lifetime.
Also changed is the ability to suspend your benefit retroactively, repaying whatever you’ve received and then getting the higher benefit in the future. Now, retirees will be able to suspend their benefit, but only for the months in which they didn’t get a benefit. Suspending future payments, once a request is made, will still be possible. I suspect there are other areas in Social Security that may be tightened in the future. These two don’t work for most people, since they can’t afford to come up with the dough required to pay back benefits. I’ll keep you posted as things change.
I want to wish you all the best for a wonderful holiday season. The Money Tips Online Blog will be taking a break until January 4th, when I begin my second year as a blogger…the 13th year since my weekly missives began as an e-newsletter! Until then, happy holidays, happy new year, and here’s to good planning!