No more “Do-Over” Strategy for Social Security Retirement Benefits


On December 8, 2010, the Social Security Administration published a new rule eliminating the “do-over” strategy some retirees were using to boost their retirement benefits. The new rule went into effect immediately.

The “do-over” strategy worked like this:  a senior retired early, before full retirement age; collected and invested the reduced benefits for several years; then withdrew the initial application, repaid the benefits (interest-free) and re-applied for the higher benefits awarded to those who wait a few more years to start claiming their benefits. It was a way to boost benefits for early retirees who could afford to pay back the benefits and who were willing to bet that they or their surviving spouse would live long enough to come out ahead.
It was a little-known strategy, or one that only a few people stumbled upon naturally, until it became publicized in the media in 2008. At the time, a Forbes article quoted a Social Security Administration spokesperson as saying, “We don’t consider it naughty.” Apparently, however, the use of this strategy has increased over the past couple of years to the point where the Social Security Administration now does consider it “naughty.”
The new rule sets a 12-month limit for withdrawing an application for benefits, and each person may only withdraw an application once per lifetime. Further, for those already receiving benefits, they may request a suspension of benefits, but it will only suspend benefits going forward. That is, they are not grandfathering in the ability to suspend and repay retroactive benefits to those who are already receiving benefits.
Although the new rule is effective immediately, there is a 60-day period for public comments, and the agency will be publishing another final rule responding to comments and incorporating any “appropriate” changes.
To read the full text of the rule:
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