The move can boost future benefits — but
beware of unintended consequences
Jun 19, 2019 @ 4:00 pm By Mary Beth Franklin
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.
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