While retirement might seem like a distant horizon for many of us, understanding Social Security now can set us up for a more secure future. Â
One lesser-known aspect of Social Security is the “payback option” – a strategy that could potentially boost your benefits down the line.
What is the Social Security Payback Option?
The payback option, sometimes called the “do-over” strategy, is like an undo button for your Social Security claim.
If you start receiving benefits but then have second thoughts, you can essentially hit reset within the first 12 months.
How Do I Start the Payback Option for Social Security?
To initiate the payback option for social security, you do the following four steps:
1. You withdraw your application for benefits.
2. You pay back all the benefits you have received so far (including any benefits paid to your spouse or children based on your record).
3. It is as if you never filed for benefits in the first place.
4. You can then reapply later, potentially securing a higher monthly payment.
How Long Do I Have to Start Social Security’s Payback Option?
You only have a 12-month window after you start receiving benefits to use this option. Once that clock runs out, you are locked into your decision.
What are the Pros and Cons of the Payback Option?
The Upside:
– Potential for higher lifetime benefits
– A safety net if your plans or finances change quickly after claiming
– Possible tax advantages from repaying benefitsÂ
The Downside:
– You’ll need to repay all benefits received – potentially a hefty sum
– It is a one-time deal – you cannot use this strategy repeatedly
– There’s paperwork and planning involved
– No guarantees – waiting does not always mean more money in the long run
Who Should Use the Social Security Pay Back Option?
While retirement might seem far off, understanding this option now could be valuable later. It could be particularly useful for:Â
1. Those who claim early but then land a great job
2. People whose health outlook improves unexpectedly
3. Individuals with a family history of longevityÂ
4. Anyone experiencing a major positive shift in their financial situationÂ
How to Evaluate if the Payback Option is Right for You
1. Crunch the numbers: Can you afford to repay the benefits?
2. Use online calculators: The Social Security Administration has tools to estimate future benefitsÂ
3. Think long-term: Consider your health and family history
4. Talk to the pros: Financial advisors and tax experts can offer valuable insightsÂ
5. Reach out to Social Security: If you decide to go for it, you will need to submit Form SSA-521
Is the Social Security Payback Option a Good Choice?
While the payback option is not for everyone, it is a tool worth knowing about. It offers flexibility in your retirement planning, even if that planning is just starting. Remember, Social Security is just one piece of the retirement puzzle. Â
The choices you make now – saving, investing, and planning – can have a big impact on your financial freedom down the road. Stay informed, stay curious, and do not be afraid to ask questions about your financial future.Â
About the Financial Authors
Alexander Langan, J.D, CFBS, currently serves as the Chief Investment Officer at Langan Financial Group. In this role, he manages investment portfolios, acts as a fiduciary for group retirement plans and consults with clients regarding their financial goals, risk tolerance and asset allocation.Â
With a focus on ERISA Law, Alex graduated cum laude from Widener Commonwealth Law School. He then clerked for the Supreme Court of Pennsylvania and worked in the Legal Office of the Pennsylvania Office of the Budget, where he assisted in directing and advising policy determinations on state and federal tax, administrative law, and contractual issues.
Alex is also passionate about giving back to the community, and has helped establish The Foundation of Enhancing Communities’ Emerging Philanthropist Program, volunteers at his church, and serves as a board member of Samara: The Center of Individual & Family Growth. Outside of work and volunteering, Alex enjoys his time with his wife Sarah and their three children, Rory, Patrick, and Ava.
Reid Ruark currently serves as an Associate Investment Advisor at Langan Financial Group where he assists Alex in managing investment portfolios, prepares client reviews, and helps operate social media platforms. In his free time, Reid enjoys spending time with his wife, playing pickleball and connecting with members of the community.
About Langan Financial Group
Langan Financial Group is an award winning independent financial planning firm with 10+ independent awards and over 100+ 5 star reviews.
Langan Financial Group has two financial planning locations – Harrisburg, Pa and York, Pa. Established in 1985, Langan Financial Group offers a broad range of financial planning services for individuals and organizations.
By being an independent firm, we are not required to sell any specific products or meet any specific quotas. As such, we are able to focus more on providing fiduciary services and customizing a specific personalized financial plan according to your needs.
Disclosures
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
