A Major Change To The Social Security "Do-Over"

A Major Change To The Social Security "Do-Over"

The government just closed a very attractive Social Security loophole that used to give folks, if they used the rule correctly, what amounted to be an interest free loan. It essentially allowed you to take advantage of what I call a "do-over." You could start collecting Social Security before your full retirement age, which for most people right now is age 65. You could take early Social Security benefits as early as age 62, at, I'll say, $750 a month. Which would allow you to get $750 a month for three or four years before you would otherwise start collecting Social Security benefits.The disadvantage was that you would be locked into the lower, early payment (that I'm saying is $750 a month) instead of the full payment, which I'll say is $1,000 a month. Except that there was a fairly simple way out. If you wanted to do-over your Social Security benefit and start collecting that $1,000 a month, all you needed to do is pay back the money that you had collected before you started your new Social Security benefit.Now some people, obviously, may not be financially able to pay back three or four years of $750 a month payments, because it would add up to one big, fat check. But for other people who are in a position to do it, and then reapply for their $1000 a month social security benefit, it amounts to an interest-free loan. They could even defer collecting Social Security until age 70, when, using the scale I'm using here, their Social Security benefit would be a little over $1,300 a month.You used to be able to do as many of these do-overs as you needed or wanted to. You could started collecting $750 at age 62, pay it back at 65 and collect $1,000 a month, then pay that money back at age 70 and start collecting $1,300 a month.Unfortunately, Social Security realized that some people were taking advantage of that very opportunity, and they closed that door.From now on, you still can do a "do-over," but only if you've been receiving Social Security benefits for less than 12 months. So the attractiveness of this strategy has been severely cut back and limited. Now if you start collecting Social Security benefits at age 62 at $750 month, before you turn 63, you have to decide whether you're going to pay those funds back and reapply either then or at some point in the future, or if you're just going to stick with the reduced Social Security benefit.What this really means is that, now more than ever, folks need to determine the optimum time to start receiving Social Security benefits. It's important to do proper planning to make sure that you make a choice that's right for you.This really is an individual situation there really is no right or wrong way when it comes to selecting your individual Social Security benefit, because everybody's situation is different. Are you working or not? What other income sources might you have? How will that affect your taxes?The bottom line is that planning is always the key. You need to make smart choices about your money to give you the best shot towards a worry-free retirement.

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