Dear Liz: In a recent column, you answered a question from someone who had started receiving Social Security benefits at 62. You mentioned the many advantages of delaying the start of Social Security checks until full retirement age but then said, “In your case, it’s too late for second thoughts anyway.”
Why didn’t you mention the option of repaying all the Social Security checks you’ve received and then restarting your benefit at a higher amount, based on your age? I first learned about that option from one of your columns a few years ago, and actually did it. It sure worked out great for me. Viewed as purchasing a fixed annuity in the amount I paid back, I’ve been getting about a 9.5% annual return. Thanks so much for alerting me to that option!
Answer: The payback option was indeed a good one for people who regretted starting their benefits early and who had the means to pay back everything they’d received from the program. This “do over” allowed them to lock in a higher benefit amount for themselves and for their surviving spouses. In essence, they were able to “invest” the money they paid back and get a higher return than they could get from any other safe investment.
Unfortunately, after the payback option started receiving a lot of publicity, the Social Security Administration decided in 2010 to end it. So it’s no longer possible to correct the mistake if you start benefits too early unless you do so within the first year after applying.
This just underscores why it’s so important to research and understand your options before you apply for Social Security. Good resources include the AARP website, which has an easy-to-use retirement planner, and the book “Social Security for Dummies” by Jonathan Peterson. Another resource is the “Maximize My Social Security” calculator developed by economist Laurence Kotlikoff at www.maximizemysocialsecurity.com. For $40, the calculator will allow you to play with different scenarios and show you which options will increase your lifetime benefits.