This Little-Known Social Security Move Could Get Retirees a Bigger Benefit

If you've claimed Social Security and are unhappy with the benefit you're collecting, you may feel like you have few options. After all, your benefits are coming, so it likely seems too late to make major changes to your retirement plan.

In reality, though, you aren't necessarily doomed to a lifetime of reduced Social Security checks. There's a little-known option available to you that you may be able to take advantage of to increase the amount you collect. This increase can sometimes be pretty substantial too.

This option won't work for everyone, and it has drawbacks, but it's still worth considering. Here's what you need to know.

How to undo a Social Security claim you regret

So, how can you boost your Social Security benefit after you've started collecting? It's simple. You can ask for a do-over. This is formally called rescinding your benefit, or canceling or withdrawing your benefit application.

You are allowed to withdraw your application for Social Security one time in your lifetime, but you must act within 12 months of getting your benefits approved.

When you rescind or cancel your application, it is as if your early claim never happened. If your benefits had been reduced by early filing penalties because you claimed before full retirement age, that reduction will no longer affect you.

So, for example, if you claimed Social Security at 62 with a full retirement age of 67, you'd have reduced your benefit by 30%. If you rescind your application a few months later, though, then you will no longer be viewed as claiming at 62. You erase that 30% reduction in benefits, and the specific amount you collect is determined based on the age you ultimately claim benefits.

Here's how you can rescind your application

If you've decided that rescinding your application is right for you, you need to file Form SSA-521. This form is a simple request to withdraw your application and requires basic details like your Social Security number and the kind of benefit you want to withdraw.

The hard part, though, is that you must repay every dollar of Social Security benefits collected before you rescinded. This includes not just benefits you personally collected, but also any other benefits paid based on your work history.

For example, if your spouse received spousal benefits, you would have to pay those back too.

How much extra Social Security income can this strategy help you collect?

The amount of extra Social Security income you can receive by requesting a do-over is very substantial. But it all depends on when you ultimately claim benefits.

Let's say, for example, that you have a $2,000 standard benefit that would be yours if you start Social Security at your full retirement age of 67. But if you claim at 62 instead, you shrink the benefit by 30% and bring home just $1,400. If you regret that early claim, you can rescind it.

Then, let's say you wait until 70 to start Social Security payments again. This earns you delayed retirement credits that boost benefits by ⅔ of 1% per month, or 8% annually. If you earn three years of those credits, your benefit jumps to $2,480.

That's $1,080 more you have coming in because you initially rescinded your claim.

Does a Social Security do-over make sense for you?

A Social Security do-over may make sense for you if you changed your mind about accepting the smaller benefit and you have the funds to pay back what you've collected. If your health or financial situation has improved and you no longer need Social Security at a young age, then this approach also makes good sense.

Before moving forward, though, consider what repaying your benefits would mean for your finances today. You could be giving back several months of payments at once, along with any benefits others received based on your record. That could require a significant amount of cash, so increasing your future monthly benefit may not be worth draining savings or leaving yourself without enough money for unexpected expenses.

You should also think about how long you realistically plan to delay claiming again. Rescinding an early claim can eliminate the reduction tied to that original filing, but the size of your eventual benefit will still depend on when you restart Social Security. Waiting longer generally results in a larger monthly payment, while claiming again sooner means a smaller increase.

Bottom line

Ultimately, a Social Security do-over can be a huge benefit if you end up wishing your payments were larger. But you have a narrow window of time to act, as once the 12-month window closes, it's too late.

Don't wait if you decide rescinding is right for you, as doing so could be a major financial mistake you come to regret.

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