When it makes sense to suspend Social Security benefits

Social Security does not typically grant a “do-over,” although, in some circumstances, retirees may request one. For individuals who can make it through without their monthly paycheck, for the time being, delaying Social Security could lead to a greater payout in the future. However, this strategy shouldn’t be confused with removing Social Security benefits, which function under different circumstances.

Here’s everything you need to know regarding suspending your Social Security benefits, plus when you should do so.

What does it mean to suspend social security?

You can postpone your retirement benefits if you’ve achieved the full retirement age (FRA) and are younger than 70. The critical phrase is “if you’ve reached full retirement age.”

You can submit your request in writing or verbally and suspend your benefits for the next month. If you suspend your benefits, they will automatically restart when you reach age 70, but you can reinstate them anytime. 

Social Security Withdrawal Do-over

If you’ve decided to receive Social Security payments, you can request a withdrawal at any age. You may terminate your benefits, formally known as your primary insurance amount (PIA), up to one year after becoming eligible.

The Social Security Administration will then regard you as if you never enrolled. Your PIA then continues to increase until you opt to begin receiving benefits once more.

This “do-over” permits you to accumulate a larger payout in the future, following Social Security’s standard benefit modifications. A withdrawal mandates you to reimburse any money earned, including benefits to a spouse or kid and money withheld for Medicare.

If you choose to remove your benefits, you must submit Form SSA-521 and explain why. 

If you intend to file a withdrawal, you must do so within the 12-month time restriction. Otherwise, you may be unable to defer your Social Security benefits until you reach full retirement age.

When is it reasonable to terminate Social Security benefits?

There are numerous factors to consider before reapplying for Social Security benefits. However, some of the most significant factors include evolving demands for your longevity, a new financial condition (perhaps due to a change in employment), and a planning strategy with your spouse to maximize your benefits. All of these factors, however, center around maximizing the after-tax advantage of the program.

•        Longer life: If you expect to live longer than anticipated, it may be prudent to defer your payments and try to accrue as much benefit as possible. You can conduct a break-even evaluation to determine what is most rational. However, if you are married, you should consider when your spouse will begin receiving benefits and how this would affect your total payout.

•        Taxes: Especially if you pay your taxes early or are working while collecting Social Security, onerous tax regulations might consume a significant portion of your income. 

•        Misunderstanding: Individuals who begin collecting at a younger age may not realize that they are locking in a lower monthly benefit amount than what they are eligible for if they wait until they become older.

•        Medicare expenses: Medicare premiums are often deducted from retirees’ benefits, so you will be responsible for any payments if you suspend or withdraw your benefit. You will be separately charged if you desire to continue Medicare Part B supplemental insurance coverage until your benefits are reinstated.

•        Nobody on your record: It may make sense if no one else is seeking benefits on your record. Remember that if you suspend your retirement benefit, anyone who gets benefits on your records, except your divorced spouse, will not be allowed to collect benefits while your benefits are stopped. Any advantages you obtain on someone else’s record will be suspended.

•        Capable of affording it: If you are waiting for a greater benefit, you must be able to meet your expenditures until your benefit begins again. And if you withdraw benefits, you’ll need to be able to cover both your living expenses and the payback of any money you’ve previously received, which is a tough order.

•        Other conditions: Depending on the circumstances, a suspension or withdrawal of benefits may be appropriate when collecting survivor benefits for a widower or widow and their dependents and collecting on a spouse’s benefit as opposed to your own in the case of divorce or remarriage.

If you delay your payout, you can still benefit from the growth in your full retirement benefits and any cost-of-living adjustments (COLA) resulting from inflation.

Next year’s benefits are expected to increase by approximately 9% due to the rising cost of living. You will earn an 8% deferred retirement credit if you delay your benefits.

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Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.

Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.

Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.

Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.

Aaron can help you and your family to create, preserve and protect your legacy.

That’s making a difference.

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