Geraldine: I have a client who is 64 years old and has been collecting Social Security benefits for two years. She recently got a part-time job and wants to know if she can stop her Social Security benefits now and restart them at a higher level later.
MBF: Unfortunately, if she has been collecting Social Security for more than 12 months, she can't stop her benefits now, but she might be able to in the future.
The option to withdraw an application for Social Security benefits and repay any benefits received is a once-in-a-lifetime opportunity and must be done within 12 months of first claiming benefits.
Although your client missed that 12-month window, she has another do-over option. But she must wait until she reaches her full retirement age, which in her case is 66 and 4 months.
At that point, she can suspend her benefits and she will not need to repay them. Her monthly benefits will stop but she will start earning delayed retirement credits worth 0.66% per month for a total of 8% per year up to age 70.
By claiming benefits at 62, 52 months before her full retirement age, your client received about 73% of her full retirement benefit. If she suspended her benefits at full retirement age, she could grow those benefits to about 94% of her full retirement age amount by age 70.
In the meantime, she should know that income from her part-time job could trigger the Social Security earnings test, which could temporarily reduce her benefits. In 2020, she can earn up to $18,240 per year. If she earns more than that, she would forfeit $1 in benefits for every $2 over the limit. Next year, the earnings limit increases to $18,960.
If your client expects to earn more than the annual limit, she should contact Social Security so they can adjust her benefit.
Otherwise, SSA will require her to repay any excess benefits received once the discrepancy is discovered. The earnings restrictions disappear at full retirement age and any benefits forfeited to the earnings cap will be restored in the form of higher monthly benefits.
Mary Beth Franklin, a certified financial planner, is a contributing editor for InvestmentNews.
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