Feds close door on Social Security Payback Option

Social Security Payback Option Eliminated


Retirees will no longer be able to get an interest-free loan from the Social Security trust fund, the Social Security Administration announced today. Effective on December 8, retirees will not be able to pay back benefits already received in exchange for higher Social Security payments going forward. Here's a look at how the new Social Security rules could impact your checks.

Little-known provisions of Social Security law previously allowed individuals to begin payments at age 62, pay back all the benefits received at age 70 without interest, and then reclaim at a higher rate due to delayed claiming. However, this claiming strategy, which is employed primarily by affluent households, costs the federal government and Social Security trust fund money. "The processing of these withdrawal applications is also a poor use of the agency's limited administrative resources in a time of fiscal austerity -- resources that could be better used to serve the millions of Americans who need Social Security's services," says the SSA in a statement. The Center for Retirement Research at Boston College calculated that if all the American workers with enough liquid assets to repay their Social Security benefits utilized this strategy it would cost the system $5.5 billion.

Under the new rules, Social Security beneficiaries may withdraw an application for retirement benefits only within 12 months of their first Social Security payment and are limited to one withdrawal per lifetime. "There is little to be gained by investing benefits for only 12 months," notes the SSA in the rule.

Comment: I first heard of the Social Security payback option two or three years ago from one of my Brother-in-Laws. Makes sense to close this door. Our own strategy is to delay receiving benefits until each of us are 66. One of my Brother-in-Laws delayed his completely (did not use the payback option) until he turned 70 (he's now 73)

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