Social Security do-over: Claim, suspend, and restart

See ways to boost your Social Security paycheck by up to 24%.

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Key takeaways

  • Some people regret their decision to claim Social Security early, well before their full retirement age (FRA). Fortunately, a "do-over" option is available.
  • If you claimed early and now have the financial resources to reconsider, you can still potentially boost your annual or monthly benefit by up to 24% by suspending your Social Security for 1 to 3 years after you reach your FRA.
  • If you have longevity in your genes and have the financial resources to pay for expenses from sources other than Social Security, this retirement income strategy could significantly boost your lifetime income.

You've probably heard about the common myth that everyone is required to claim Social Security at age 62. The reality: You can claim your inflation-adjusted Social Security income anytime between age 62 and 70. The longer you wait, the greater the monthly benefit.

So what if you are like the 35% of Americans who decided to claim early—at age 62? Are you stuck with that decision?

Not necessarily. Social Security allows you to change your mind once during the first year of receiving benefits. Then you have to pay back everything you've already claimed that year.

But what if you have second thoughts after the first year?

Good news: There's a little-known strategy to readjust your Social Security claim and produce additional guaranteed lifetime income. It's called "claim-suspend-restart"—CSR.

"Many people made a misguided decision and claimed Social Security early. In fact, some 65% of people claim before their full retirement age (FRA)," says Can Lu, director of Fidelity Financial Solutions. "However, CSR may be a good strategy if you can afford to forgo some payments for 1 to 3 years in exchange for a greater payout of guaranteed income in later years."

CSR Social Security claiming strategy: How it works

Why do so many people claim Social Security early?

There are many reasons, for sure. About 1/3 of people claim at 62 and many don't realize they are leaving a lot of money on the table—up to a 30% permanent reduction in monthly benefits vs. claiming at your FRA.

Here are 8 key reasons:

1. You don't expect to live that long. Health status, longevity, and retirement lifestyle are 3 variables that can play a role in your decision when to claim your Social Security benefits. Generally, many people who suffer from poor health decide to claim early, as they don't anticipate that they will live into their 90s.

2. You planned to keep working. Some people planned to work a few more years, but were laid off and unable to find another good-paying job, so they need to claim Social Security at 62 to help pay for basic living expenses.

3. You never established an adequate emergency fund.

4. You need a bridge to Medicare. One of the biggest challenges for people age 62 to 65 is to find quality health care—and be able to afford it. Health care options between retirement and Medicare coverage include COBRA, private insurance, the public marketplace, and a spouse's plan. Tip: Read Fidelity Viewpoints on Fidelity.com: Your bridge to Medicare

5. Your young children are receiving a benefit. If you remarried later in life and had children, they may still be under age 18, living in your household, and able to receive a payment based on your claim.

6. Opportunity to invest. Some people access their monthly benefit and then invest it because they believe they can "beat the market"—a phenomenon that rarely happens for the "average investor."

7. Belief that the Social Security trust fund will run out. Some people mistakenly believe that Social Security won't be around forever, so they should claim as early as possible to "get their money now."

8. COVID. Maybe you decided to take care of your grandkids full-time or ended your career early to take care of a loved one.

Why suspend Social Security after FRA?

A few years into retirement, you probably have settled into a retirement lifestyle that fits your budget. You may have decided to tighten your belt to lower expenses or you may seek ways to boost your income in retirement.

"Some people regret claiming their Social Security early because they left money on the table," says Lu. "They wonder about outliving their money and would like a slightly higher standard of living in retirement. With this CSR claiming strategy, they can achieve that goal."

For others, they may have experienced a rising stock market, have found a great part-time job in retirement, or may have even received a windfall from a relative. In any event, their circumstances have improved and now they don't have to rely on Social Security to pay the bills. Maybe their kids have already finished college or they've gone through a "gray divorce" and decided to remarry. Any way you slice it, you find people who are hopeful about their finances in retirement. With more money, they have more options.

Now they've discovered that they can actually delay gratification by suspending their Social Security at FRA for a while, say at least a year. Then restart their claim. The net result is a boost of monthly payments by 8% per year. "Once some people are retired, they realize for one reason or another, they don't need their Social Security income over the next few years. They would rather have a higher benefit down the road as inflation and longevity protection," says Lu.

Restarting Social Security after FRA

If your retirement planning is in order by the time you reach your full retirement age, this CSR strategy may make a lot of sense. After you suspend Social Security, you still have a few options to consider. For every month that you suspend, you are adding "retirement credits" to your Social Security. For the biggest gain possible, you can consider suspending your claim when you reach your FRA, and then wait until age 70 to restart your claim.

If you choose this route, the Social Security Administration will reinstate and increase your benefit automatically when you reach age 70. Remember, for every full year that you suspend, your benefit is increasing 8% per year. So if you suspend for 3 years from age 67 to 70, your benefits jumps by 24% when your resume claiming benefits—that's a guaranteed benefit that will also increase with inflation for the rest of your life.

Tip: If you've reached your FRA, "run the numbers" to see if you have the financial capacity to fund retirement expenses during the delay period. If you can, then "test drive" the suspension of benefits for a year see how it works for you. Then review this option annually to see that it still makes sense for your situation. Fortunately, there's no commitment to keeping it in place through age 70. You can employ it for up to 36 months (the time between FRA and age 70) at your discretion.

Case study: Claiming at age 62 vs. CSR strategy

In a hypothetical example, Jorge was born in 1960. He plans to claim his Social Security benefit at age 62 (see left side of the chart below) and receive $1,399 per month. Over his expected lifetime (93 years), his total benefit is estimated to be $520,428.

Now, let's examine if Jorge employed the CSR strategy. In a scenario where he decides to employ the strategy to its maximum benefit, he would suspend his benefit from FRA at age 67 to age 70. The amount of benefit foregone during the suspension period is estimated to be $50,364 and he would have to tap into retirement and personal savings to cover his expenses over that timeframe in order to maintain the same level of spending during the suspension period (see right side of the chart below).

When Jorge restarts his claim, his monthly benefit jumps to $1,734 per month. That's an increase of 31% over the first scenario and is estimated to boost his total benefit by $42,096 — increasing his lifetime benefit to $562,524. Of course, if he had a shorter life expectancy than 93, as assumed here, his potential payoff in the form of his lifetime benefit could be substantially lower. And Jorge will need to fund a $50,364 income gap for the 3 years he is suspending his benefit.

Jorge's hypothetical case: Claim at 62, suspend at FRA, and restart Social Security benefit at age 70 for a bigger payoff

Summary

One of the keys to this CSR strategy is to be able to tap into retirement or personal savings for a period of approximately 1 to 3 years when you won't be getting your monthly Social Security checks. "You need the financial capacity to self-fund the so-called bridge from approximately age 67 to 70," adds Lu.

"This strategy represents a cost-effective way of purchasing inflation-adjusted retirement benefits that are also guaranteed for a lifetime," says Lu. "Despite what most people are told, claiming Social Security is not an irrevocable decision. You can still take advantage of the positive impact of delaying your final claim which is maximized at age 70. Those increased payments really add up over time, especially if you live into your 90s."

In life, we often try to make the best choices based on information that we know—at that time. If you've already claimed Social Security, or reached your FRA recently, it makes sense to work with a financial professional and consider this CSR strategy, which may help boost your retirement income over your lifetime.

Next steps to consider



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