SSA-521 Do-Over

[Broland]

I started SS at FRA late last year. Didn't need the money, but wife never worked outside the home and her 50% of mine stopped growing at that point so I figured why not? Anyway, I have the cash to pay back everything I've received to this point and restart later, thus getting another 8% increase on my portion (not a bad return in today's "safe money - dry powder savings" monies).

Has anyone done it and can offer any advice/guidance if you encountered problems or issues doing it? Thanks for any insights.

 

[perrytime]

Yes I have,
I filled out forms for SS to start Feb 2022, but for unknown reasons SS started in January. That was bad because my earning for Jan were over the limit. Also in January I filled out form to withdraw application as my job wasn't ending as expected.
I waited patiently, got SS $ in March and April. When i called, the form had been lost.
Finally got it stopped. Each of those months I made more than allowed.
So i prepared to repay all the SS $. After 6 months of no contact, i made several calls to figure out how to get $ paid back, dead ends each time. On my last call in Nov, i was plainly told it should i owed no $, just be patient.
It's Jan 1 2023, and nothing, then a few weeks latter I get the 1099, the SS $ has been reported to IRS and I owe taxes on it. Now I am worried I am going to owe taxes and at some point have to pay it all back, not just because i did do over, but because earnings during months i go SS were large enough to require repayment of it all.
The job ended, I applied and started SS in April 2023. Not a word about the previous SS $.
The 2022 SS $ is reported on tax return. It does take some time for IRS to follow up with problems on tax returns, so i don't feel safe they may eventually come after the $.
So the do-over didn't go at all as advertised, and i still don't know if I am going to get screwed over, having to pay taxes on $ and have to return the full amount.
Since you were FRA, my issues of earnings will not effect you. hope it all goes smooth for you
good luck.

 

[Broland]

Hmm ... not comforting. Thanks for the insight. I'll wait to see if any other experiences pop up before pulling the trigger. Might not be worth it given the potential hassle.

 

[ivinsfan]

Why did you change your mind? IMO it's so complicated that you should think it through hard before switching. Are you saying your wife is FRA? Why would you give back some of her payments she won't get a bump. However you both will get a CPI bump in the new year.

 

[Broland]

Why did you change your mind? IMO it's so complicated that you should think it through hard before switching. Are you saying your wife is FRA? Why would you give back some of her payments she won't get a bump. However you both will get a CPI bump in the new year.

Here's my thought process, I'm currently in a t-bill that's getting me five and a quarter percent. If I take that money out and put it towards the payoff of what I received I'll immediately earn 8% on that money (at least my portion of it).

 

[oldtimer]

Here's my thought process, I'm currently in a t-bill that's getting me five and a quarter percent. If I take that money out and put it towards the payoff of what I received I'll immediately earn 8% on that money (at least my portion of it).

You are not accounting for the loss of the monthly income. Did you use opensocialsecurity.com prior to you applying at your FRA?

 

[Broland]

You are not accounting for the loss of the monthly income. Did you use opensocialsecurity.com prior to you applying at your FRA?

There's definitely a lot of ways to look at this. I did do opensocialsecurity and of course it says to wait till 70.

I've thought about this waaaaay too much for the issues, cost/benefit, etc and have finally came to the conclusion that I actually like having some income. After 11 years of "no income" (just living off investments), paying IRMAA etc. I have to admit that seeing an automatic deposit in my checking account (and NOT having to write a check for medicare each month) was kind of nice. Perhaps that's the bottom line ...

No replies necessary ... thanks to those who responded!

 

[pb4uski]

Here's my thought process, I'm currently in a t-bill that's getting me five and a quarter percent. If I take that money out and put it towards the payoff of what I received I'll immediately earn 8% on that money (at least my portion of it).

No, you don't earn 8%... that is a popular misconception.

If you delay past your FRA your benefit increases 8% for life for each year that you delay. Below is an example of a PIA of $1,000/month. If you defer at 62 you forgo receiving $8,400 annually ($1,000 * 12 * 70%) for 8 years, but beginning at 70 you get an additional $6,480 for life [($6,480 = ($1,000 * 12 * (1+8%*(70-67))) or $14,880; - $8,400]

If you live to 90 then the "return" is 5.1% real, or if inflation is 3% then it would be 8.1% nominal.

Age	n	Cash flow	IRR
62	0
63	1	-8,400
64	2	-8,400
65	3	-8,400
66	4	-8,400
67	5	-8,400
68	6	-8,400
69	7	-8,400
70	8	-8,400
71	9	6,480
72	10	6,480
73	11	6,480
74	12	6,480
75	13	6,480
76	14	6,480
77	15	6,480
78	16	6,480
79	17	6,480	-1.7%
80	18	6,480	-0.4%
81	19	6,480	0.6%
82	20	6,480	1.5%
83	21	6,480	2.2%
84	22	6,480	2.8%
85	23	6,480	3.3%
86	24	6,480	3.8%
87	25	6,480	4.2%
88	26	6,480	4.5%
89	27	6,480	4.8%
90	28	6,480	5.1%
91	29	6,480	5.3%
92	30	6,480	5.5%
93	31	6,480	5.7%
94	32	6,480	5.8%
95	33	6,480	6.0%
96	34	6,480	6.1%
97	34	6,480	6.2%
98	34	6,480	6.3%
99	34	6,480	6.4%
100	34	6,480	6.5%

 

[bada bing]

I started SS at FRA late last year. Didn't need the money, but wife never worked outside the home and her 50% of mine stopped growing at that point so I figured why not? Anyway, I have the cash to pay back everything I've received to this point and restart later, thus getting another 8% increase on my portion (not a bad return in today's "safe money - dry powder savings" monies).

Has anyone done it and can offer any advice/guidance if you encountered problems or issues doing it? Thanks for any insights.

I don't have strategy advice, but I think you have a misconception. Your wife's spousal benefit is based on your PIA and her age when she claims. Her spousal claim will increase until she hits her FRA not to age 70. And of course, you have to be drawing in order for her to start. You didn't give your respective ages, but it's pretty likely that opensocialsecurity will recommend that you start drawing at your wife's FRA, so that she can start her max spousal benefit.

 

[Broland]

I don't have strategy advice, but I think you have a misconception. Your wife's spousal benefit is based on your PIA and her age when she claims. Her spousal claim will increase until she hits her FRA not to age 70. And of course, you have to be drawing in order for her to start. You didn't give your respective ages, but it's pretty likely that opensocialsecurity will recommend that you start drawing at your wife's FRA, so that she can start her max spousal benefit.

Wife never worked outside the home so she gets 50% of mine at file time. Because of that her increase stops at MY FRA.

 

[Broland]

I appreciate the additional insights (especially pb4uski's more thorough analysis). I started at 66+6 (which is my FRA). Since my wife's increase wouldn't be applicable in the equation, my break even would be slightly delayed a few years I believe ...

 

[oldtimer]

Wife never worked outside the home so she gets 50% of mine at file time. Because of that her increase stops at MY FRA.

That statement is true if your wife is the exact same age as you or older than you. It is not true if she is younger than you.

 

[Broland]

Another omission on my part, yes she is a cougar (1 year older) ��

 

[bada bing]

Wife never worked outside the home so she gets 50% of mine at file time. Because of that her increase stops at MY FRA.

You need to review how spousal benefits work. What you've posted is not correct and might make a difference in your strategy.

You're wife's spousal benefit is based on your PIA -not your reduced/increased benefit from filing at other than your FRA. She will get up to 50% of your PIA (your benefit at your FRA), her maximum spousal benefit is if she claims at her FRA.. It does not matter when you claim, as long as you've claimed before she does. If she claims before her FRA then her spousal benefit will be reduced.

Spousal and survivor (what she'd get after you die) have quite different formulas, which is another major consideration in your claiming strategy.

I've found youtube videos from Devin Carrol to be handy. Here is one he did on SS spousal rules: