Withdrawal of Social Security Claim Within First Year

Both married and single individuals should be aware of opportunities they have to redo a prior Social Security claiming decision. In so doing, an individual could improve their monthly retirement benefit.

In the first of three columns discussing “redo” options that are available for Social Security beneficiaries, this column discusses the withdrawal of application for Social Security benefits.

SEE ALSO:

• 10 Ways for Federal Employees to Maximize Social Security Benefits
• Quirks of Waiting Until Full Retirement Age to Claim Social Security Benefits

Single Individual Withdraws a Claim for Social Security Benefits

Those individuals who are eligible to receive Social Security retirement benefits (they are “fully insured,” having earned a minimum of 40 credits of Social Security) can apply for their retirement benefit as early as age 62. But if they apply for their retirement benefit at age 62, their monthly retirement benefit will be reduced permanently by as much as 30 percent. If the individual wants to avoid a reduction, the individual must apply for their benefit at their full retirement age (FRA).

FRA depends on an individual’s year of birth and ranges from age 65 to age 67. The closer to one’s FRA when applying for their Social Security benefit, the less reduction. For an individual born after December 31, 1959, FRA is age 67. If that individual applies for their Social Security benefit at age 62, their monthly benefit will be reduced permanently by 30 percent. The following example illustrates:

Example 1. Carol is a single individual who was born on March 15, 1962. Carol’s FRA monthly retirement benefit is $3,000. She filed for her Social Security retirement benefit in March 2024. Based on her earnings record, Carol’s monthly Social Security benefit at age 62 is $2,100 per month. This is 70 percent of $3,000. She then learns that due to her estimated life expectancy of 88 years, she could increase her Social Security benefit by delaying the start of her Social Security monthly benefit until she is age 70.

If less than 12 months have passed since Carol started receiving her Social Security monthly benefit, she has a one-time opportunity to redo her prior Social Security claiming decision. In particular, she could withdraw her application for retirement benefit through March 31, 2025. If Carol withdraws her application, then she must pay back all prior benefits received based on her earnings. No interest would be owed on the repayments. Suppose Carol elects to withdraw her application on August 22, 2024. She would have to repay the Social Security Administration (SSA) the following amount:

$2,100/month times 5 months (April – August) equals $10,500 (with no interest charge)

Carol may withdraw her claim for Social Security retirement benefits by completing Form SSA-521 (Request for Withdrawal of Application).

In order to understand why this redo strategy may be appropriate for Carol, suppose Carol lives to her life expectancy of 88 years. The total lifetime benefits for each claiming strategy will be determined: (1) Claiming at age 62 and continuing to receive benefits until Carol dies at age 88, and (2) Claiming at age 62, withdrawing her claim for benefits within one year, and waiting until age 70 to reclaim benefits, and then dying at 88. The total real lifetime benefits are summarized in Table 1. Real lifetime benefits are gross monthly benefits paid through the years with no annual cost-of-living adjustments included in the calculations.

Table 1. Single Person Withdraws Social Security Application

By withdrawing her claim for benefits that she made at 62 and then reclaiming for benefits at age70, Carol would increase her expected “real” lifetime benefits by $803,520 less $655,200, or $148,320. Note again that this analysis does not take into account Social Security cost-of-living adjustments (COLAs). That is why the difference om Carol’s expected lifetime benefits are expressed as expected “real” lifetime benefits.

What is the “breakeven age” for Carol? In other words, how long would Carol have to live in order to make this redoing strategy work in her favor? To determine that age, the following analysis is performed:

1. Difference in monthly benefit (age 70 benefit less age 62 benefit) = $3,720 – $2,100 = $1,620
2. If Carol does not withdraw her application, total benefits received from age 62 to age 70.:
8 years x 12 months/year x $2,100/month = $201,600
3. Number of years Carol would have to live in order to “recover” the $201,600 if she reclaims at age 70:
$201,600/$1,620/month = $124.44 months (10 years and 5 months)

Carol’s “breakeven” age is 80 years and 5 months. In other words, Carol would have to live until at least 80 years and 5 months in order to make her redoing strategy work to her advantage.

Married Couple: Higher Earner Spouse Withdraws Social Security Application

The following example illustrates the withdrawal of a Social Security claim of the higher earner spouse of a married couple.

Example 2. Ronald and Stephanie are married, and both are eligible for their own Social Security monthly retirement benefit. Ronald, age 62, has a full retirement age (FRA) of 67 years with a monthly benefit of $3,200 and a life expectancy of 75 years. Stephanie, age 59, has an FRA monthly benefit of $1,800 and a life expectancy of 90 years.
Ronald became age 62 in January 2024 and applied for his Social Security monthly benefit at that time. He thought that was the right decision given his expected life expectancy of 75 years. He received his first Social Security retirement benefit of $2,240 (70 percent of $3,200). In June 2024 (before 12 months has passed since he received his first monthly Social Security check), he finds out that filing for his monthly benefit at age 62 not only permanently reduces his monthly benefit by 30 percent but will also permanently reduce Stephanie’s survivor (widow benefit if he predeceases her). Monthly Social Security benefits based on Ronald’s earnings record will continue until the second spouse dies.

In order to maximize their expected joint lifetime Social Security retirement benefits, Ronald should withdraw his application before January 31, 2025, and repay all the monthly benefits he received when he becomes age 70 in January 2032. He will then reapply for his retirement benefit of $3,968 ($3,200 times 1.24) which reflects three years of delayed retirement credits. Table 2 below shows the total amount of Ronald’s and Stephanie’s lifetime benefits based on Ronald’s earnings record:

Table 2. Ronald Withdraws Application at Age 62 and Reapplies at Age 70

If Ronald were not to withdraw his application at age 62 and dies at age75 he would receive $2,240 in benefits for 13 years. Upon his death at age 75, Stephanie would receive a survivor (widow) monthly benefit of $2,640 per month, based on Ronald’s earnings record. This monthly benefit would continue for 15 years until Stephanie’s death at age 90. The $2,640 monthly widow benefit is the larger of $2,240 or 82.5% of Ronald’s FRA amount of $3,200. Table 3 shows the total amount of Ronald’s and Stephanie’s lifetime benefits based on Ronald’s lifetime earnings record.

Table 3. Ronald Files for Social Security Retirement Benefit at age 62

In comparing Table 2 and Table 3, by Ronald withdrawing his claim for benefits at age 62 and reclaiming his monthly retirement at age 70, Ronald’s and Stephanie’s total lifetime benefits are $952,320 less $824,640, or $127,680 greater than the total lifetime benefits had Ronald not withdrawn his application.

Summary: Withdrawal of Claims for Higher Earnings Spouse

The lesson to be learned is that the higher earning spouse should base their starting date for Social Security monthly benefits on the age they would be when the second spouse is expected to die. In this example, Ronald has a short life expectancy. He should withdraw his application within the first year, repay his benefits and delay the start of his benefits until age 70. With respect to the lower earning spouse, the rule is: Benefits will last only until the first spouse dies. That being said, the lower earning spouse should file for his or her benefit as early as possible (age 62) or as soon as possible if the lower earning spouse is older than age 62.