Skip to main content

Social Security "Do Over" loophole closed

The Social Security Administration has eliminated a loophole that had allowed Social Security recipients to start receiving benefits when they first became eligible but then gave them a chance to re-do their benefits at a higher level later on.

Anyone can collect Social Security benefits starting at age 62, but if you elect to get early benefits, your monthly check will be much lower than if you wait until full retirement age. Many people elect early benefits, but then realize it was a mistake. Because of a rule allowing you to change your mind, many people were electing early benefits as a planning technique.

A provision of Social Security law had allowed beneficiaries to apply for early benefits but at a later age they could withdraw their application, reapply and receive full retirement benefits. All they had to do was pay back all of the benefits they had received. Since there was no interest added to this, it gave those who could afford to do the pay-back a second look at their choice, at no additional cost. Of course, this really only benefited those wealthy enough to afford the pay-back. Those who spent their monthly checks were stuck with the lower amount and could not afford the "do-over."

Under the new rules, retirees may still withdraw their Social Security applications, but only once and only within 12 months of first receiving benefits. You can still change your mind if you file for early benefits, but only if you change your mind quick enough. And, you still have to pay back those early benefits. And, you can only do it once. So, this planning strategy is no longer available for those who could afford to take the chance for several years and make a possibly large pay-back in order to get higher monthly benefits.

Here is the SSA news-release on the change: http://www.ssa.gov/pressoffice/pr/withdrawal-policy-pr.html

Comments

Post a Comment

Popular posts from this blog

Ending the Two Year Wait for Medicare for SSD Beneficiaries

A Bill, pending in Congress, would end the two-year waiting period for Medicare benefits for people who qualify for Social Security Disability (SSD) - individuals who have suffered a medical condition that renders them unable to work ("Permanently and Totally Disabled"). Medicare coverage is currently available to individuals who are determined to be eligible for SSD benefits, but not until 29 months after the month in which SSD eligibility is determined. For those without private insurance, who can't afford COBRA, or whose costs exceed the catastrophic limits of their private coverage, the 29 month wait creates serious financial hardship and often leads to impoverishment for those who need to spend down for Medicaid coverage. Some couples must consider divorce to protect the non-disabled spouse. Please ask your Senators and Representative to co-sponsor the Ending the Medicare Disability Waiting Period Act of 2009 (S. 700/H.R. 1708), which will end this two-year waitin...
Post a Comment
Read more

WILL YOU REALLY NEED LONG TERM CARE?

By Edward H. Adamsky             “The potentially catastrophic consequences of becoming disabled and needing long-term care is arguably the gravest financial risk that older adults face” says an Urban Institute report. But, will it happen to you? And, if so, have you saved enough money to pay for it? These are the worries we all face as we age. This is a worry even for younger folks because an accident or illness could trigger the need for care at any time.             The Urban Institute report shows that even though there are 6 million older Americans who need assistance with their activities of daily living, only about 500,000 folks are actually in nursing homes. Some use paid at-home care and many rely on unpaid family care. It seems that your chances of needing and paying for expenses care are relatively low. The stated average cost in the report is $138,000 for the ...
Post a Comment
Read more

4 Planning Tips for Parents of Disabled Children

Buy enough life insurance . You can’t be replaced, but someone will have to fill in if you aren’t there. Your family will probably have to pay for some services that you used to provide. You can provide the money necessary, even if you don’t have much now, with life insurance. Set up a trust . Any assets left for a child with special needs, including life insurance proceeds, should be held in trust. Leaving money directly to someone with a special need jeopardizes public benefits. Some families disinherit children with special needs, relying on siblings to care for them. This approach is fraught with potential problems. The best approach is a trust fund set aside for the child with special needs. Write down the care plan . You must write down what a future caregiver will need to know about your special needs child. You may know everything but you need to write it down so it can be passed on. The memo or letter can be kept in the attorney's files or with the parent's estate plan...
2 comments
Read more