I often counsel readers about the option of suspending their Social Security benefits as a way to increase their future payouts. One reader had a simple question: How could he do it?
"I claimed Social Security at 62 and I will turn 66 in December," said Randy of Zanesville, Ohio. "I started to do some projects to generate additional income, so I don't need the money from Social Security, and I would love to suspend my benefits until 70. I just don't know how to go about it."
It's a great question with a simple answer.
If you are already entitled to benefits like Randy, you may voluntarily suspend retirement benefit payments once you reach full retirement age. You can ask the Social Security Administration either over the phone (800-772-1213) or in writing to suspend your benefits.
The suspension would begin the month after you make the request. Social Security benefits are paid the month after they are due. So, for example, if you contact the Social Security Administration in June and ask to suspend your benefits, you will still receive your June benefit in July. Your benefits will stop in August and will automatically resume when you reach age 70.
In the meantime, your retirement benefits would earn delayed retirement credits worth 8% per year (2/3 of 1% per month) from the time you suspended your benefits up to age 70. If you change your mind and want the payments to start before age 70, just tell Social Security when you want your benefits reinstated, either orally or in writing.
But before you decide to suspend your Social Security benefits as a way to create a larger monthly income in the future, consider your entire situation, including how that decision may affect other family members and how you will pay your Medicare premiums.
If you voluntarily suspend your retirement benefits and you have others who receive benefits on your record, such as a spouse, a minor child or permanently disabled adult child, they will not be able to receive benefits during the suspension. And you cannot receive benefits on someone else's record, such as spousal benefits on your mate's earnings record, during the suspension.
There is one exception: A divorced spouse can continue to receive benefits on your earnings record even after you suspend your benefits.
In Randy's case, his wife is 62 and has not yet claimed Social Security, so his decision to suspend his benefits would not affect her at the moment but it could create a larger survivor benefit in the future. Survivor benefits are worth up to 100% of what a deceased worker was collecting or entitled to collect at the time of death.
Initially, Randy collected just 75% of his full retirement age benefit because he claimed Social Security four years early, at age 62. By suspending benefits at 66, his reduced benefits would increase by 8% per year, for a total boost of 32% by age 70. That would increase his age 70 benefit amount to 99% of his full retirement age benefit amount (75% x 1.32 = 99%). If Randy dies before his wife, that is how much she could receive as a survivor benefit, assuming she was at least full retirement age at the time.
If you are enrolled in Medicare, there are other consequences of suspending your Social Security benefits.
Normally, Medicare Part B premiums are deducted directly from monthly Social Security payments. In 2019, most Medicare beneficiaries pay $135.50 per month for Part B, which covers doctors' fees and outpatient services, but some beneficiaries pay much more, depending on their income.
Individuals whose adjusted gross income, plus any tax-exempt interest, exceeds $85,000 per year, or married couples whose income tops $170,000 per year, are subject to high-income surcharges that can boost monthly Medicare Part B premiums to as high as $450.60 per month per person. Medicare surcharges are reset each year based on the last available federal tax returns.
If you suspend your Social Security benefits and you are enrolled in Medicare Part B, you will be billed for future premiums by the Centers for Medicare & Medicaid Services. You will have the option of automatically paying the bill from your bank account.
People who claimed Social Security benefits within the past 12 months — including those under full retirement age — have another option. They can withdraw their application for Social Security benefits by filing Form 521 and reapply at a future date. However, they must repay all the benefits that they and their family members have received on their earnings record. There is a limit of one withdrawal per lifetime.
Check out Mary Beth Franklin's podcast, Retirement Repair Shop.