San Francisco, CA (PressExposure) April 07, 2009 -- You're almost there. Reaching age 62. Or you're there already. Maybe even headed for 66 or 70. So its time to make an important decision. A decision that will change the rest of your life no matter if you live to be101.
Social Security. Your Social Security. The payback for all the money they took from each and every one of your paychecks for all the years you worked. The decision is a tough one. Early Retirement at 62 starts the checks coming but at the lowest level possible. Wait until you're 66 and you get a much higher amount every month. And if you gamble that you can make it until you're 70, you win the Social Security Lottery, and get the top amount for the rest of your life.
With more than 10,000 people a day becoming eligible for their Social Security, that's a lot of decisions.
Here's an example of what they tell you in Your Social Security Bulletin to help you decide. Take Early Retirement at age 62, your payment would be about $1,401 a month. Take your Full Retirement at age 66 Years and your payment would be about $1,930 a month. Hit the jackpot and reach age 70, and you Bonus Full Retirement would be about $2,626 a month.
So if you get to 70 it's almost twice as much every year!
Now before you start to make any decisions, you need to know something. If anyone tells you not to start taking benefits at 62, and wait until you're 66 or even 70, run away, but not too fast. And if you hear that the reason is you're stuck at that benefit level until you die? Well, here's the news - it's not true.
Buried in one of the dusty SSA Provision Guidelines books, in Section 15, under Provision 1515, is a jewel. It's called "The Right to Withdraw Application". It's a rule that almost no one either knew or remembered. And it's worth thousands of dollars to thousands of people.
You can start taking your benefits at 62, and change them to the higher levels at 66 or even 70. It's a simple one page form that takes about 3 minutes to complete.
The rule was written into Social Security years ago and never widely advertised. No one I spoke with even remembers exactly when or why Provision 1515 was made into law. But you can use it today if you're 62 or 66 or even 70. You can add thousands of dollars - dollars that are indexed to inflation no less - every year to your retirement.
You need to repay the benefits you've received from whenever you started, say 62, to the point you're stopping, at 66 or even if you're 70. Then you simply restart at the higher level. Get it? You stop and restart your Social Security benefits. Plus there's more. If you invested the cash, you get to keep the interest tax-fee. You also get a one-time tax deduction or credit for all the money you pay back.
And you leave the higher benefit level to anyone who survives you. Your Uncle Sam was very generous indeed when he wrote the restart provision.
It may seem like a lot of money, but the money you pay back is like buying an inflation-indexed annuity from Social Security. At 66 or 70, the higher benefits will provide a much better standard of living until the day you die. And it's anywhere from 30-40% cheaper that buying an inflation-indexed annuity from even the lowest cost provider. Restarting your Social Security at 66 or 70 allows you to purchase the cheapest and safest annuity from Social Security. In terms of financial planning for your retirement, it's a great deal.
According to Social Security expert David Grebow, "At Social Security headquarters they told me applying would be routine. According to the officials I spoke with, if it makes you enjoy a healthier and wealthier retirement, you should use it. After all, they wrote it."
They just forgot to tell you.