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A "sweet deal"

For someone like Rothenhoefer, who had been collecting monthly checks for eight years, the price of repaying Social Security benefits can be steep -- $100,000 or more in some cases. But he thinks it's well worth it. Not only will his monthly check be about 75% larger than his previous benefit, but it will also increase with inflation each year for the rest of his life. And if John dies first, his wife, Charlotte, 67, will collect the same monthly amount as a survivor benefit for as long as she lives.

Here's how it works: Let's say you qualify for full benefits of $1,600 a month at your normal retirement age of 66, but you decide to begin collecting your benefits at 62. Your retirement benefits will be reduced by 25% for the rest of your life -- to $1,200 a month, in this example -- because you'll be collecting a smaller benefit for a longer period of time.

On the other hand, if you delay collecting benefits, you will receive an 8% credit for every year beyond your normal retirement age until you reach 70, when your maximum benefit will be 132% of what you would have received at age 66. In this example, you would receive about $2,100 a month at 70 -- a $900 difference.

Maybe you decided to collect benefits early out of fear that you wouldn't live long enough to collect the larger delayed benefit. But now that you've made it to 70, you may regret your decision and wish you were receiving a larger check.

In order to get one, you must first file Form 521 at your local Social Security office to request a withdrawal of your application for benefits. Your retirement benefits will stop almost immediately -- and if your husband or wife receives spousal benefits based on your work record, his or her benefits will stop, too. Then the Social Security Administration will send you a letter telling you how much you need to repay (including any spousal benefits). That process may take several weeks. Once you repay the benefits, you can reapply for new, higher payments based on your current age.

If, for example, you received $1,200 a month starting at age 62, plus annual cost-of-living adjustments through age 70, you would have to repay about $130,000. That's a lot of money, but for some people it's worth the price to get an additional $900 a month in retirement. By comparison, it would cost a 70-year-old man about $190,000 to buy an immediate annuity that would provide $900 a month initially, plus annual inflation adjustments and a 100% survivor benefit. That's 46% more expensive than "buying" a lifetime annuity from Social Security.

Rothenhoefer thinks it's a "sweet deal." He concedes the strategy could backfire if both he and his wife were to die before they recoup their investment, which will take about ten and a half years. Still, he says, "it's worth the gamble," particularly because his wife stands a good chance of living into her nineties, as her mother and grandmother did.

There's another financial downside: You may have to go without Social Security benefits for a few months while the agency sorts out how much you have to repay and you reapply for benefits. When your benefits stop, so do the automatic deductions that cover your Medicare premium. You'll have to pay the Part B premium yourself -- currently $96.40 a month for most retirees -- until your Social Security benefits resume.

Crunch the numbers

Boston University economics professor Laurence Kotlikoff says repaying and reapplying for Social Security benefits is a "fantastic option" for some people. But it can involve a lot of number-crunching to determine whether it's the right decision for you. Kotlikoff offers case studies on his Web site, www.esplanner.com. For $149, you can access his sophisticated financial-planning software, which lets you create your own comprehensive retirement plan, including an analysis of the pros and cons of a decision to pay back your Social Security.

John Greaney, who started the Retire Early Web site (www.retireearlyhomepage.com), says that members of his online community were aware of the repayment strategy but treated it as an urban legend. When Greaney took the time to research it last summer, he realized that it was an even better deal than he had first thought. That's because when you repay your Social Security benefits, you can claim either an itemized deduction or a tax credit (whichever results in bigger savings to you) for the taxes you paid on your benefits in previous years. The calculations are complicated, but you can get all the details in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, at www.irs.gov.

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POSTED BY: Tom West (June 04, 2008 02:12 AM)
I was flabbergasted to read that I apparently can receive a spousal benefit even though I plan on delaying my SS until age 70. I am 66 years old and therefore I have reached full retirement age. My wife, age 67, has been drawing SS since age 62. If I understand Ms. Franklin correctly I can receive a spousal benefit until I begin drawing my benefit at age 70. Could this possibly be true? It strikes me as counterintuitive. But I shall certainly look into this! What do other readers think?

POSTED BY: Mary Beth Franklin (June 04, 2008 12:50 PM)
Hi, I'm the author of this Kiplinger article. In answer to Tom West's question, it's absolutely true. Now that you have reached your normal retirement age, you can elect to apply for SPOUSAL benefits only, and delay collecting benefits on your own work record so they will be worth more later. You can not elect to separate your benefits if you apply before your normal retirement age. Warning, though: many Social Security field officers are not familiar with this nuance. If they are unfamiliar with it, insist (politely) on talking to a supervisor.

POSTED BY: alec (June 04, 2008 03:05 PM)
In this article, you mention a recent paper by the Center for Retirement Research. What is the title of the paper?

POSTED BY: Harvey Nadel (June 04, 2008 06:15 PM)
Numerous people, such as myself, continued to work after 65 (my age to collect SS benefits) but didn't have to lose any SS dollars because they were covered under the SS law for persons 65 or older. There will be an effect on previous income tax returns that SS was taxed on because of the amount of income that was taxed during a specific tax year. If one is to apply for this SS opportunity they should definitely talk to a very skilled tax advisor first.

POSTED BY: Tom Nuhn (June 04, 2008 09:43 PM)
(A question about this section in the story) to comment about: "After the death of his first wife several years ago, Bill married a younger woman, and they're expecting their first child this year. When the baby is born, he or she will receive monthly Social Security checks worth up to half of Bill's benefit until the child reaches age 18. How can the child of someone else who hasn't died collect Social Security?

POSTED BY: Eric Bingman (June 05, 2008 09:32 AM)
I have read several articles about various ways for retirees to boost their Social Security benefits. I have also read several articles with predictions about how Social Security will eventually go bankrupt. As a diligent worker and taxpayer in my late 20's, I have to wonder how this is going to affect the generations to come. When retirees delay taking Social Security benefits and use these methods to significantly increase the amount they recieve, is it helping or hurting generations to come? I certainly agree that those who have paid into the program should recieve their share of benefits, but when I hear about ways to have "Uncle Sam", also known as "the taxpayers", pay college tuition for the children of retirees, it really concerns me. I am afraid that a program designed to be supplemental income for some will become a cash cow for others. So, my question is do these methods help everyone, or do they help some and hurt others?

POSTED BY: JO SOUTHWEST (June 05, 2008 01:02 PM)
I am curious how this could work for me. My husband started drawing SS at 62, he died when he was 68. I started receiving spousal benefits @ 60 (I was 55 when my husband died and did not qualify any monies till age 60). Should I just continue with my very reduced benifits till age 70 and then re-pay and re-apply. I will turn 62 this year (and seem to be healthy) and I am wondering how I could come out the best with SS benifits down the road. Has anyone else been in this position that could give some insight?

POSTED BY: David Tifft (June 07, 2008 01:22 AM)
I'm not surprised that only 71 people out of 32 million Social Security recipients in a year took advantage of this unusual provision in the law. If it were really such a great deal, then don't you think it would be much more commonly used, and that the information about it would be passed around by word-of-mouth?

POSTED BY: Peter Kane (June 09, 2008 10:03 AM)
I have a problem with the example given for someone like John Rothenhoefer. Using the numbers quoted in the article, a 70-year old recipient would receive a benefit of $2,100 a month after taking advantage of the Social Security do-over strategy. This is compared to an early retirement benefit of $1,200 that he received some 8 years ago at the age of 62, and is cited as a $900 monthly increase. However, this ignores the fact that the initial Social Security benefit of $1,200 would itself have increased to about $1,520 due to annual cost-of-living adjustments over 8 years, which the recipient would now be giving up as part of any Social Security do-over. As such, the gain is not $900 as quoted, but only $580 ($2,100 - $1,520) a month. Instead of paying the government back $130,000 for a do-over, for the same amount a 70-year old man could buy an immediate annuity that would provide $580 a month initially, plus annual inflation adjustment and a 100% survivor benefit. This means that the strategy as outlined would merely result in a washout when compared to an annuity. The fact that the $130,000 payback could be claimed as either an itemized deduction or a tax credit for income tax purposes also does not result in any advantage. If an immediate annuity is paid for with pre-tax savings (such as a Traditional IRA) the $130,000 would not be taxed. Instead, the income from the policy is taxed in the year it is received. If paid for with after-tax savings a portion of each annuity payment will be excluded from taxation until the $130,000 purchase amount has been returned. Accordingly, there also seems to be no tax benefit. I started out reviewing this matter with the full intention of implementing the Social Security do-over strategy, because the numbers for my wife and I are eerily close to the Rothenhoefer example. Unfortunately, upon further scrutiny, the advice appears to be flawed. Am I overlooking something? If so, I would very much appreciate someone straightening me out, since I would not want to lose out on a good thing.

POSTED BY: Mr Brown (June 10, 2008 08:50 AM)
Nice if you are in the 1% of people who has the money to pay it back. For the vast majority this is a dream. Thanks anyway.

POSTED BY: Philip Greenberg (June 11, 2008 01:20 PM)
If the article is accurate, then almost EVERYONE should collect SS as early as possible. The money should be put into a CD, and not be touched. A decision as to whether to file a do-over can then be made at a later date. In the meantime, the money earns interest that does not need to be repaid. Banks and insurance companies could craft special products to address this situation (contact me for thoughts on how such a product would need to be structured). Tax and other considerations can be built into these products. Free Money!!!

POSTED BY: Jerry (June 12, 2008 08:14 PM)
If Peter Kanes figures are correct then the payback plan is inadequate. With a payback of 130,000 to get an additional $580 a month the interest that the 130,000 earns would more than offset this increase. Also if death took place before the additional payments restored the $130,000 the change would leave only a spouse in the same offsetting situation. I don't see this as a good deal at all

POSTED BY: kal lawrence (June 13, 2008 01:43 AM)
Peter Kane's comment ignores the vital fact that the $2100 would increase by the same COLA amount as the $1200, and would thus grow to $2660 (using Mr. Kane's COLA assumptions). Thus, by withdrawing the original application and restarting at age 70, the new amount is $1140 per month higher, and continues go grow with inflation.

POSTED BY: Peter Kane (June 13, 2008 08:15 PM)
This is in response to kal lawrence’s comment. In the example, the $2,100 would be the current monthly payment a 70 year old would receive from Social Security after the do-over. It incorporates any COLA adjustments to date. This sum would grow with inflation in the future, but so would be the type of immediate annuity that I compared it to.

POSTED BY: kal lawrence (June 17, 2008 02:39 AM)
Let me clarify my comment of June 13 in terms of the dialog with Peter Kane. Suppose you are 62 and looking at your SS annual statement, that says: at age 62 you get $1200/month; at age 66 you get $1600/month; at age 70 you get $2100/month. These are the apples-to-apples figures that are being discussed in the article, all three of which appear on a single SS benefits statement when you are 62. Whether or not you begin benefits at age 62, eight years later the COLA would have amounted to about 26% (again, using Mr. Kane's figures), and this COLA applies to all three figures. So, whether you have been taking the low figure for eight years, and withdraw your original application, or whether you waited till age 70 to first begin your benefits, the $2100/month amount would have increased by the same 26%, and this increased amount is the benefit you start getting at age 70.

POSTED BY: Peter Kane (June 20, 2008 02:54 PM)
It took a while for me to get my head around the numbers, but kal lawrence’s last posting of June 17th clarified things, and I thank him. Now I am back to implementing a do-over. I learned another piece of information that may be helpful to someone who files for a withdrawal only to learn that they made a serious error in their calculation. It seems that one can actually cancel a request for withdrawal even after the S.S.A. has approved it, as long as it’s done within 60 days after the notice of approval - (S.S.A. Handbook, Article 1515.5). You could call this a do-over of the do-over.

POSTED BY: ron waddell (June 21, 2008 06:39 AM)
I don't understand how this is such a good deal. If you have two men who both take social security at 62 and at age 70 one man pays 130,000.00 back to S.S. to increase his monthly checks by 900.00 and the other man does nothing, but continues to recieve his 1,200.00 a month benefit. Say both men live ten more years to age 80. The man who paid back the money to S.S. to increase his monthly benefit will have recieved approx. 108,000.00 more than the other man, in benefits, over the ten year period. But the other man will still have his 130,000.00 plus any interest he would have earned on it, which together would certainly dwarf the 108,000.00 advantage of the other man. I'm just an average Joe, but is my thinking wrong here?

POSTED BY: John (June 23, 2008 05:40 PM)
I have been told by 2 different people at Social Security that the "delayed retirment credit" that boosts the monthly payment applies ONLY to (in this case) Rothenhoefer, and not to Charlotte. Thus, if John dies first, Charlotte will not get the same amount (she will get his amount as of his full retirement age). And for this reason, it is not like buying an annuity with a 100% survivor benefit. If anyone can direct me to something to the contrary, I would be anxious to see it.

POSTED BY: Peter Kane (June 24, 2008 02:26 PM)
Since no one else responded to John’s June 24th posting, I’ll have a go at it. Your question may have been misinterpreted by whomever you spoke with. My understanding is as follows. To the extent that Charlotte’s benefits are based on John’s work record, they are calculated on John’s “primary insurance amount” (PIA) as long as John is living. This is the amount one would have received at full retirement age (65 years or older depending on the date of birth). Any delayed retirement credits would not be included in calculating Charlotte’s benefit. However, when John dies, Charlotte, as the surviving spouse, would receive John’s full benefit at the time of his death, including any delayed retirement credits. This is stated in the Social Security Handbook, Article 720.3.D.

POSTED BY: John (June 25, 2008 08:41 AM)
I just came back to the site to "retract" my comment and saw Peter's explanation. In a follow-up to my discussion with 2 separate 800-number people, I contacted the local office where the person said "that doesn't sound right"; she said she would check on it. The manager of the local office called back and explained it the same way as Peter. Thanks to all. For the record, the manager said that the worst thing you can do is call the 800 number; that's a little unsettling.

POSTED BY: Dave (June 29, 2008 09:18 AM)
The article doesn't factor in the earning power he loses when he re-pays the $130,000. At 5% that's $540/month. So his net increase is $360/month, not $900. If my logic is correct, you'd have to live to at least a 100 to make it a good deal. Am I wrong?

POSTED BY: TD (June 29, 2008 08:02 PM)
By my calculations the $130,000 earning 5% would provide the same benefits until about age 88. (Assuming all the SSA is taxable and ignoring that SSA is only 85% taxable). If the person dies before then he would be better off keeping the money. However, if he lives to 100 he would be about $100,000 better off by repaying SSA. Place your bets on longevity. If both spouses repay SSA, the survivor only gets the larger amount. If only the higher earner repays the survivor gets the higher amount.

POSTED BY: Tom West (June 30, 2008 02:57 PM)
Since I started this whole thread, I now wish to update you all. Here is my situation: Both my wife and I have reached full retirement age, but my wife started drawing SS at age 62. I reached full retirement in Feb/2008 and have decided to delay my benefits (I plan to work full time until age 70; I am in excellent health; and I am a descendant of people famed for their longevity). Until I read Mary Beth Franklin’s column I never dreamed I could, in the meantime, draw spousal benefits. Well, I did apply for spousal benefits. I did so online, which was a mistake, for the application submitted online was misinterpreted by the SSA as an application for benefits drawn on my account, not my wife’s. So I had to withdraw that application. After talking to a local agent, I re-submitted my application and within 10 days a spousal benefit retroactive to February 2008 was deposited in our checking account. Here’s a strange thing: My spousal benefit is calculated at 50% of what my wife would be receiving had she decided to begin drawing benefits at her full retirement age. But remember, she decided to begin drawing at age 62. So my spousal benefit is not 50% of what she currently receives, but 50% of a higher figure. Here is another strange thing. They have switched my Medicare A to my wife’s account, the logic of which completely escapes me. I should receive a new Medicare card soon (I don’t use Medicare--I continue on my employer’s health insurance). By my calculations, I shall have to live only to age 82 for this to become a plus for me. Not only that, by waiting until age 70 I dramatically raise the benefit my wife would draw should I did before her (her health and longevity prospects are even better than mine). But be careful. Mary Beth Franklin is a absolutely correct: many agents in SSA have no idea that one could do this. In my case, three of them gave me totally wrong information. I finally ran into an agent in my local office (Mpls) who got it right. You have to be very persistent!

POSTED BY: Mary Beth Franklin (July 01, 2008 03:47 PM)
I am thrilled that my Kiplinger article sparked such a lively debate. I have heard from several readers like Tom West who were able to put some of these strategies to use to boost their SS benefits. One reader who is receiving retirement benefits didn't realize that his 5-year-old child was also entitled to benefits worth up to 1/2 of his monthly amount. He has since applied for her benefit, received more than $40,000 in retroactive payments and she will continue to receive more than $1,000 a month until she is 18. Please share your stories. I'm preparing a follow-up article.

POSTED BY: Chris Nelson (July 02, 2008 12:27 AM)
I am sickened to learn of the huge amounts of social security dollars being squandered on minor children of retirees. This is one of the reasons that Social Security is underfunded. Perhaps people who wish to start second families in their old age should do so only if they can afford it.

POSTED BY: J. Naxxar (July 02, 2008 04:36 PM)
I am a Federal retiree making $2,519 a month of retirement benefits. Because of the windfall, I am not eligible to collect my husband's social security when he dies. He only receives $650.00 per month, but that money would help me with the cost of living increasing. Is there anyway we can get around this windfall?

POSTED BY: Jim Cummings (July 04, 2008 08:17 AM)
A very interesting article. As a CPA, I had never heard of it.

POSTED BY: Tem (July 04, 2008 02:05 PM)
I am reading where some of people think it is wrong to take full advantage of the current tax laws and "boost" a retiree's income. If it is legal, what is the problem? When you are at these folks age, you should take full advantage of the laws at that time. I am sure you take full advantage of the laws that benifit you now, right?

POSTED BY: Ihall (July 05, 2008 02:56 PM)
Nothing wrong with the kid getting SS $, try all those ex-wives diving in to e'xs ss $ since they earned more than collecting thier own - the recipent monthly annuity does not get reduced. That is where it should be stopped.

POSTED BY: Jean313 (July 06, 2008 11:07 AM)
I am outraged that "Bill's" late in life child will receive SS benefits at birth while having two living parents to support him, one still working. When did SS go from providing for the aged to rewarding procreation?

POSTED BY: terrie (July 06, 2008 11:10 AM)
I am 72 and actually started collecting benefits at age 62.I used the social security calculators to figure my benefit as if I retired this year. My increase was not close to the 900$ amount shown in the article. After ariving at a "PIA" and increasing that by 130% my increase was still only 500$. What did I do wrong?

POSTED BY: hello (July 11, 2008 03:13 PM)
...do not be upset with that man who's children get to collect SS. Chances are their father (who looks like a grandfather) is the exception not the rule. Most of these kids have parents on a fixed income that covers the household exspenses and nothing more. If Dad passes on before the child graduates the household income plummets nearly 50%. Young moms usually quit work also because they get money for a child under 16 or 17. But when that magical birthday hits, the house hold is in topsy-turvy. Ususally that young mother is now a caregiver and will not have a pension of her own. These gold diggers get pregnant to these older men on purpose! And of course, its the children who suffer! Dad usually passed before high school graduation and these bitter ladies end up feeling like a single mom after all.

POSTED BY: wtf? (July 13, 2008 08:32 PM)
I love what hello said: "Don't be upset with that man..." followed by "These gold diggers get pregnant..." When a 67 year old man gets a woman pregnant and expects social security to pay for the child; hello calls the woman dirty names...

POSTED BY: anonymous (July 18, 2008 01:44 AM)
I think it's discusting that some old fart can remarry, make babies, and soak Social Security--a system that is suppose to support the older citizen. Maybe it is time for an overhaul of the system!!!

POSTED BY: Stan Oleysyck (July 18, 2008 03:42 PM)
If a spouse took an early retirement at age 62 (now 70+) and her SS benefits were taxed due to her spouses income -- would they receive a refund of all taxes paid on her SS if she repaid ALL SS received?

POSTED BY: bkl (July 23, 2008 06:59 PM)
The SS payments Bill receives for his child belong to the child. He is the custodian of his child's money; SS calls him the "representative payee." The 529 will be owned by the child through a UTMA 529. The state tax deduction, if available, will be the child's on the child's tax return.

POSTED BY: Chun Wang (August 04, 2008 12:47 PM)
I went to the local SSA at Flushing NY, 11355 today (Aug.4, 2008) and submitted the form SSA-521. Their representative told me that I have to repay the entire retirement benefits right away with the form -- it is more than $150,000.00 -- not as you said they are going to send me a letter in the future and tell me how much I have to repay. If they are wrong, how can I convince them to change their mind? Thank you in advance.

POSTED BY: Mary Beth Franklin (August 11, 2008 10:39 AM)
Responding to Chun Wang.Yes you have to repay all of your SS benefits when you submit your form 521 before you can restart your higher benefits at your current older age. I'd be surprised if SSA could calculate your cumulative benefits on the spot. Normally it takes a few weeks.

POSTED BY: Mary Beth Franklin (August 11, 2008 10:40 AM)
Responding to Stan: You can file for a tax credit or an itemized tax deduction for taxes paid on benefits that have been repaid. It's a fairly complicated calculation. See IRS Publication 915.

POSTED BY: jmb (August 11, 2008 12:19 PM)
I'm 66 and won't collect SS until age 70. I understand I can now collect spousal benefits on my wife's account retroactive to the time she first started collecting.(Anybody know correct form # ?) Will this reduce my benefits when I start collecting at age 70 ? Thanks

POSTED BY: Terry Satherlie (August 11, 2008 03:38 PM)
Can Mary Beth or anyone tell me: If my husband is 66, still working and NOT collecting SS, can I, (age 59, and not working) collect half of his SS benefits allowed.

POSTED BY: Mary Beth Fraklin (August 12, 2008 08:19 AM)
To JMB: Once you reach your normal retirement age, you can "restrict" your application to begin receiving SS retirement benefits to "spousal benefits onl"y. There is no special form, but be advised that many SSA agents are not aware of this nuance. By collecting spousal benefits only starting at 66,you can then switch to your own higher benefits at 70 which will include four years worth of delayed retirement credits boosting your benefit to 132% of what it would have been at age 66.

POSTED BY: Mary Beth Franklin (August 12, 2008 08:21 AM)
To Terry: Sorry, that won't work. The earliest you can collect SS retirement benefits is 62 and at that age, your benefits will be reduced by 25% or more for the rest of your life. (Widows can collect reduced survivor benefits at 60.) To be able to restrict your application to spousal benefits only, you must be at least normal retirement age, which is 66 for anyone born between 1943 and 1954.

POSTED BY: Angela Stading (August 13, 2008 07:58 AM)
My parents are divorced and one is deceased as of 1989 and neither remarried. I read an article about 10 years ago that stated that the former spouse could collect the other's Social Security once he or she reaches retirement age, whether the ex-spouse is deceased or not. Is this true? Also, could one collect on a deceased ex-spouse's Social Security now, even though the divorce took place before his death?

POSTED BY: Bob Iverson (August 13, 2008 08:13 AM)
I quit working at 64 and started to collect SS. If I stay unemployed until I'm 70, will I receive higher benefits by repaying what I've received and reapplying? A SS agent told me you have to keep working for this strategy to pay off. Thanks.

POSTED BY: Moving On (August 13, 2008 09:16 AM)
My husband of 35 years has 'moved on' to a younger wife. He is collecting SS since he was 62 and is now 67. I will be turning 66 this year, but plan continuing to work and to not begin receiving my own SS benefits until age 70. In the meantime, can I file for Spousal Benefits Only and collect from HIS SS, even though we are divorced?

POSTED BY: gordon wells (August 13, 2008 09:16 AM)
I fell off a ladder and broke my neck I was a fully employed painter working for the state of California at the time of the accident. The state medically disabled me from my employment. My income dropped to less than half of my monthly salary at time of release. I am being taxed by the Feds and the State, is this correct or am I being mistakenly taxed on my monthly medical retirement benefit. After taxes I went from receiving under half to barely one third of my salary I received as a painter. Can you please find me an answer to my question of taxing a medical retirement benefit? I have tried myself buy was unsuccessful. Though I did manage to find out that some medical retirement state employees do not get taxed on their monthly disability check ... confused ... thank you Gordon

POSTED BY: Ruth (August 13, 2008 12:06 PM)
Would it be wise for me to do the pay back as I started collecting on my ex husbands ss when I reached 62. I will be 70 in Nov. and wondered if my benefit would increase enough to make this worth while. My benefit started off in the $400's and now is up to $619.I wold owe ss a hefty sum but if it is worth it I would do it.

POSTED BY: Mary Beth Franklin (August 13, 2008 01:34 PM)
Bob, Thanks for your question. I'm the author of this article. You can pay back all the SS benefits you have received so far--interest free--and reapply for benefits later at an older age. Even if you don't continue to work, you would received a delayed retirement credit of 8% for every year you delay collecting between you normal retirement age (66 in your case) up until age 70. You'd have to crunch the numbers to see if it would be worth it for you to pay back your benefits vs how much more you would receive by reapplying later.

POSTED BY: Mary Beth Franklin (August 13, 2008 01:38 PM)
To Moving On: Here's an answer to your question. --Divorced women married at least 10 years are eligible for Social Security on the ex-husband’s record if they are unmarried at the time they become eligible for Social Security. --Any benefits paid to a divorced spouse DO NOT reduce payments made to the ex or any payments due the ex’s current spouse if he remarried. --Generally, the same payment rules apply to divorced wives and widows as to current wives and widows. That means most divorced women collect their own Social Security while the ex is alive, but can apply for higher widow’s rates when he dies.

POSTED BY: Mary Beth (August 13, 2008 02:30 PM)
Ruth, You'll have to crunch the numbers to see if it is worth it to repay all the benefits you have received over the last eight years and reapply for higher benefits at 70. For example, let's say you have to repay $48,000 and when you reapply for benefits, you'd be entitled to $1,020 a month--$400 more a month than you receive now. You would have to live at least 10 more years ($48,000 divided by $400 = 120 months or 10 years) to reach a break even point on your repayment.

POSTED BY: Faith M. Stayer (August 13, 2008 02:55 PM)
...I receive monthly disability benefits from Social Security and the Teachers' Retirement System of Georgia. Am I required to pay state and federal taxes on both monthly checks?... ...On another matter, does the "Social Security Do-Over Strategy" apply to retirees who receive Social Security Disability payments or only to nondisabled retirees?...

POSTED BY: Dick Weaver (August 13, 2008 09:46 PM)
Repayment of a significant amount of money is a very complex calculation and should not exclude the interest and lost opportunity value of the repayment dollars. If you include the interest lost, opportunity cost and risk of demise prior to the repayment, and the present value of continued payments; it is highly unlikely that it is a prudent decision. Bird in the hand is worth two in the bush. I know of too many people who try to outsmart the grim reaper and they just lose a lot of value by deferring SS and even more by paying back paid benefits. If it is only a year or two of payback, it may be worth the risk but anymore than that, the risk is too high. If you look at the whole picture, you should collect as early after 62 that you can as long as you don't have >$12,000 in earned income - which incurs penalty to SS payments. Take it early, don't look back and scrap the risk of repayment of significant lump sums. You will sleep better at night.

POSTED BY: Dick Weaver (August 13, 2008 10:43 PM)
The payments for minor children of SSA recipients are not well known and will gall many of us as one of the reason SSA is in deep dodo. I am a friend of one senior citizen who applied for benefits only to find that each of his minor children could get about $700 a month. The kids didn't even live with him as the second family lived with ex #2. They collected thousands and the dad used the cash to pay his child support. Now that is Federal subsidy....to pay legal support obligations!!! That certainly was not the intent of SSA when visioned last century; but one perk awarded seniors by a congress out of control who don't even participate in SSA. Have Congress participate in SSA and these type of giveaways will cease immediately. Unless, of course, some of the geezers in Congress have second families and they could tap into the "program" themselves.

POSTED BY: Bob (August 14, 2008 03:16 AM)
In the calculation for Ruth to recoup her payback would it not be appropriate to consider the loss of interest (or whatever investment vehicle was in place) on the $48,000 that would be paid back?

POSTED BY: jack black (August 15, 2008 02:45 PM)
67,8/08, I got SS$ of $2230($1966 +$234/mo to Medicare)since 2/07.I will make $50K as a consultant 12/08-3/09 and will have to pay full SS on it. Is it worthwhile for me to do a SS Withdrawal of Application( 18 months of $1966 or $35388) with my net from the $50K gross and then reapply for stepped up 8%, or more, higher SS monthly payments once the consultancy was over in 4/09? I would keep the Medicare going. Could I do another consultancy in 2010 and do the same thing to gradually get to an age 70 maximum SS monthly payment? I am in good health. Thanks

POSTED BY: Joanne Linehan (August 17, 2008 10:56 AM)
I agree with Chris Nelson and others who believe SS was not set up to provide benefits for old farts starting new families. Maybe it is time to weed out the old greedy people? Our young people are paying to support seniors, and as I have collected SS for 10 years, I am very grateful.

POSTED BY: carry waters (August 17, 2008 04:39 PM)
I retired from teaching in public education after 27 years, getting almost a full pension. Then I worked another 15 years and became eligible for SS. I find out that California teachers have their social security bnefits reduced by the size of their pension. This rule called a windfall prvision HA HA, does not apply to other professions. I feel this is unfair and unequal treatment, especially since teacher are low paid, and so not able to save a great deal fr retirement. Does anyone know if this law will be repealed?

POSTED BY: Smile (August 17, 2008 10:05 PM)
Can I collect spousal retirement benefits? I am a federal civil service employee, married to ex for 22 years. i will collect civil service retirement in about 6 years. I have not paid into SS for the 40 quarters required for my own SS benefits. Can I collect any SS benefits under my own pay in to e'xs pay into SS? Thanks

POSTED BY: Melinda Bandow (August 18, 2008 04:13 PM)
I am 69 and have been collecting ss# since my 65th birthday. I also continue to work full time. I cannot take advantage of the payback loophole as the reason I did not delay collecting is that we needed the money (and still do) My husband is a truck driver and has had 3 companies close from under him in the past 4 years. He will be 62 in December. Is there some way that I can maximize my benefits? I currently receive $1100 per month.

POSTED BY: Reane (August 20, 2008 01:59 PM)
My last child by my deceased ex turned 18 but I recently received a letter from SSI stating "We raised your monthly benefit to $1694.00.....We cannot pay you monthly benefits at this time. Why do I keep getting this letter if I don't qualify...?

POSTED BY: A Phillips (August 29, 2008 04:58 PM)
I am shocked and appalled by this article...I am in my mid-twenties and struggling to make ends meet while fulfilling my dream of public service. My hard earned money is being used to supplement their college kitty. Shame on the McCarrens, shame on the lawmakers who leave loopholes for such greedy individuals and shame on Kiplinger

POSTED BY: jo (September 09, 2008 09:23 AM)
to carry, consider yourself very lucky to have that pension option. most of us in the private sector lost our pensions to 401ks where there is no promised guaranteed return. now that's unfair. as a taxpayer i would have to increase my taxes to bailout your pension plan if it sustains large losses, but my plan has no recovery from fund losses. as for low paid teachers, not at all in long island, ny & other metro areas. their compensation dominates most private sector opportunities. govt. funded positions should be subject to the same market forces that its taxpayer base is controlled by....salary wise...

POSTED BY: Shelley (September 09, 2008 05:23 PM)
My situation is similar to Carrie Waters. I worked at a private catholic hospital and paid into SS from 1980-1998. I went back to school earned a doctorate and since 1998 I have been teaching higher ed in California. I have been informed that due to the "windfall provision" my SS will be cut by as much as 2/3 because I will receive a pension from STRS (State Teachers Retirement). Since I changed careers later in life my STRS retirement will be low (approximately 30% of my salary if I work until age 65). I pay over $900 per month into STRS. I will not get my full SS even though I have paid into both (SS and STRS) for many years. This is not fair! Does anyone know if this law will be changed? If not, does anyone know a way to (deal with) this law?

POSTED BY: Jana (September 10, 2008 01:00 PM)
To A Phillips. "Shocked and Appalled" are you? Life moves faster than you expect -- you may need this sooner than you realize. Guess what, it probably was "just yesterday" that the McCarrens... thought they could do great things too. They are not saying why they choose to retire at 62, but I'm betting on ill-health -- something which obviously you know nothing about at your age. If you continue with "public service" you will definitely need social security etc. If people your age keep yapping about it, the Goverment will be happy to take Social Security away again or lower the amounts, and then your generation can go back to eating "dog food" and starving !!!!!...

POSTED BY: S. Martinez (September 10, 2008 10:35 PM)
I, too, am appalled by the McCarrens. Since when is SS to be used because an older man elects to have a child, and now the American people are expected to provide for his child's support and education? This is an extreme abuse of the intent of SS regardless of the existence of a loophole, and shame on Kiplinger for publishing this loophole to cause further inappropriate outflow of funds from the system.

POSTED BY: Susan (September 12, 2008 06:36 AM)
For individuals who were employed under STRS or PERS, there is something called the Winfall Elimination that reduces how much Social Security you receive. To get straight information about it check the Social Security online website. STRS & Social Security. If you have more than 20 years under Social Security the amount of the reduction is reduced up to 30 years inwhich you would get 100% of both your STRS and Social Security.

POSTED BY: Eddie (September 14, 2008 12:48 PM)
My wife and I will both soon turn 62. She is currently non-working but is eligible for social security due to work in her earlier years. I plan to continue working for the forseeable future (at a higher than average income). If she chooses to start collecting social security at 62, will she have to pay taxes on the social security income because of the income I will still be making? By the way, to the complaining young ones. Don't forget, most of us older ones have been contributing to social security for forty-five years or more. So you are not supporting most of us.

POSTED BY: John A (September 14, 2008 06:42 PM)
VERY interesting article and thread! Two concise follow-on questions: 1. We're both 60 and both have plenty of "quarters" w/ good income histories. My wife will take her own SS early at age 62. But, IF we do NOT need it, given the big advantage of a MUCH higher payment for me, w/ much higher Survivor benefit for her, is there ANY reason for me to take SS before age 70? (My wife will take her own early at age 62.) 2. Is there ANY reason for everyone who is delaying their own SS claim to NOT claim spousal benefit when they're SS full retirement age?

POSTED BY: Don (September 21, 2008 12:07 AM)
I learned something from this thread, but not enough. I am left wondering if a Federal employee who retired and began receiving SS benefits at age 65 due to other work, and receiving about $500 per month reduced payment because of the windfall provisions, can withdraw his application, payback SS received and start again at age 73. I guess it would not be much of a payback since we are talking about eight years. I would have to crunch the numbers, of course. As to "old geezers" accepting payment for their children, that is really an insult. We paid into the system or did not receive benefits for up to, say, 50 years, thus taking care of your parents or grandparents. That is how the system works. Would you really like to see a widow and children in poverty. I did not remarry after my wife died, because I wanted to protect my few assets to give them to my adult daughter when I kick the bucket. However, to the guys who did remarry and have been happily raising their kids, I say GOOD FOR YOU! You have a right to happiness and if it means having a family with kids, that is OK with me. Also, when I tried to meet single/widowed/divorced women with children, they unanimously rejected me. That is the American Way, folks. These older gents, most likely, married women from other countries who do not loath older people, men or women.

POSTED BY: walt h (September 23, 2008 11:13 AM)
This is a variation of Tom Wests post & MB Franklins answer of 6/4/08. Can my wife, age 60, collect spousal benefits based on my benefits, until she reaches age 70? She has her own work history. If the above is possible, at what age can she start to collect? I have been collecting since age 65

POSTED BY: peter simard (September 25, 2008 02:46 PM)
if I take the benefit at 66 and suspend so my wife can have the 50% what happens if she keeps working (she is 2 years younger, are the benefits reduced??

POSTED BY: jean (September 29, 2008 10:15 AM)
I am 66 and retired at 62 with good ss benefits. My husband is 64, took retirement at 62, and after reading your article, repaid benefits to return to work and retire at 66, his full retirement age. At what age can he file for spousal benefits and can he continue to work?

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