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Suspending Social Security retirement benefits

My client, who is 62 years old, just lost his job. He wants to file for Social Security retirement benefits and look for new employment. A friend told him he could suspend his Social Security benefits at a future date if he found new employment and, by suspending his benefits, he would not need to repay Social Security benefits already received. Is that correct?

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Ohio is representative of a common inquiry related to Social Security benefits.

Highlights of the Discussion

No, that is not correct. “The friend,” although well-meaning, is mixing up a couple of key Social Security concepts.

Social Security retirement benefits can be stopped in two ways. The first method is referred to as the “withdrawal of application” and the second is “suspension of benefits.” Each has unique rules as noted below.

Withdrawal of Application

  • Must occur within 12 months of filing for benefits
  • The individual may elect this one time only
  • All benefits received must be repaid
  • Future benefits will be calculated as though the initial filing never occurred

Suspension of Benefits

  • Can occur only after reaching full retirement age and before age 70
  • No repayment is required
  • Delayed retirement credits are available prospectively until age 70

Thus, for a 62-year-old, because the individual has not reached full retirement age the only way to stop Social Security retirement benefits is through a withdrawal of application, which requires the repayment of benefits.

Conclusion

The rules related to Social Security withdrawal of application and suspension of benefits are complex, and other issues such as family benefits and Medicare considerations may come into play. Anyone contemplating theses decisions should seek expert advice from a tax and/or legal advisor.

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