Your client has claimed their Social Security benefits – but now, they regret it. Life circumstances change; maybe the client’s financial picture has improved. No matter the reason, there’s good news: Recipients can “unclaim” their benefits – withdraw their application for Social Security, in other words, and stop receiving benefits.
Beth Blecker, founder, CEO and managing partner of Eastern Planning, says this can sometimes make sense if a bigger payout could come down the road. She gives a scenario by way of example.
“If the client began claiming at age 62 and can pay it back within one year, he or she may wish to do so because he or she is still then able to get the 8 percent increase per year through age 90,” she said.
Once an individual elects to withdraw their claim, they’re required to immediately repay the amount they’ve received to date.
“You don’t have to pay interest on the amount, but the entire amount must be immediately paid back to the Social Security Trust Fund,” says David Peterson, managing director at United Capital.
Claimants must also repay all money withheld from their benefits, including voluntary tax-withholding and Medicare Part B, Part C and Part D premiums. He adds, “In addition, in order to withdraw the benefit, they need permission from any auxiliary recipients, such as payments to a spouse or child, and those amounts must similarly be paid back immediately.”
While clients can stop benefits anytime, there’s no payback available after 12 months of the initial claim. And an individual can only withdraw a Social Security application one time. But the process is relatively simple. The client just needs to complete Social Security Form SSA-521 and include the reason for their withdrawal.
According to Peterson, one of the most common reasons for withdrawing an application is the client is laid off and subsequently finds a new job. It might make sense, then, to withdraw a benefits claim and reapply later on for a larger monthly payout.
The process is simple, but the decision is not. And as Blecker tells her clients, that’s exactly why they need the assistance of a professional and objective advisor who understands Social Security rules and the nuances of withdrawing.
Ideally, clients would avoid having to withdraw in the first place by meeting with an advisor early on and pre-planning before making the decision to claim or delay filing in order. But you can also rest easy knowing that, if your client’s situation does change, there’s a failsafe.