Leveraging Social Security Flexibility in Retirement

Many retirees count Social Security as part of their retirement income plan. However, modern retirement is often not a linear journey. It’s incredibly common for people to go in and out of retirement. For example, you may “retire” from your lifelong career but decide to launch your own business or start to consult after traveling for a few years. Alternatively, you might be pushed to retire early during a voluntary layoff, but choose to return to the workforce in 6-12 months. 

The beauty of forward-thinking retirement planning is that you can have a level of flexibility in retirement that allows you to work, travel, and take time off in any combination you choose. One way you can plan ahead is to consider leveraging the flexibility of Social Security to fund your retirement lifestyle.

Early Enrollment

In 2020, it isn’t a secret that the economy’s ups and downs have dramatically impacted the employment of individuals across the country. If you have retired early due to job uncertainty, or been offered a voluntary (or involuntary) layoff, you may look to take Social Security benefits as soon as age 62. However, if you take Social Security benefits from age 62-67 (your full retirement age), you will have a permanently reduced benefit. Make sure that you take this into consideration before enrolling.

Withdraw Social Security Benefits

If you have started to take your Social Security benefits, you can decide to “withdraw” your application. This can be especially beneficial for those who are laid off or leave their job early, only to quickly find employment again after stopping work. You are permitted to withdraw your application for benefits within 12 months of claiming Social Security. To do this, you:

  1. Go to the Social Security Administration’s website.
  2. Fill out the Social Security Form SSA-521. 
  3. If you have anyone who receives benefits through your Social Security application, you must receive written consent for you to withdraw.
  4. Send the completed form to your local Social Security office. 
  5. If you’ve been receiving benefits during this time frame, you must pay back the benefits you received.

The only time that you can’t initiate an application withdrawal with the SSA is if you have reached your full retirement age (currently ages 66 - 67), but aren’t yet 70 years old. When you withdraw your application, the SSA acts as though you never claimed your benefit. 

This can be beneficial if you need to take Social Security early due to job loss, then are reemployed and able to pay back the benefits you received. When you withdraw your application, your benefit “resets” and it won’t be reduced if you decide to claim when you reach your full retirement age. 

Suspend Social Security Benefits

If you’ve been taking Social Security benefits for 12 months or more, or are between ages 66-70, you may not be able to withdraw your application. However, you still have the option to suspend your benefits. The process of suspending your benefits is somewhat more complex than withdrawing your application. 

When you suspend your benefits, you’ll earn retirement “credits” each month that you don’t receive benefits. These credits are essentially cashed in when you resume your benefit payments and result in a higher monthly payment to you. 

Instead of filling out an application, as you would with a benefit application withdrawal, you need to personally request a suspension. You can do this by phone, at your local Social Security office, or in writing

Keep in mind that if you suspend your benefits, no dependent who also receives benefits (like your spouse or children) can collect. You also can’t collect spousal benefits if your own benefits have been suspended. 

How This Works in the Real World

Let’s look a few examples of how suspending or withdrawing benefits might look in practice.

Example 1: 

Nancy started taking her SS at 62 when she was laid off from her job. 6 months later, she had another job and decided to withdraw her application for receiving benefits and pay back what was received. Now she can wait to apply for benefits until full retirement age or later if she chooses and will receive the benefit based on that age.  

Example 2: 

Nancy decided to take the benefits at her full retirement age, 67, but decided she’d rather wait until 70 after receiving 6 months of payments. She contacted her SSA office and asked to suspend her benefits, and will keep her benefits paid to date, and resume receiving payments no later than age 70, at a higher rate than before the suspension.

Navigating Your Retirement Strategy

Are you struggling to navigate Social Security and how it plugs into your larger retirement strategy? Working with a fee-only financial planner can help. If you have questions, reach out to us today. We are here to support you.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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