When I first heard of this I was excited at the possibilities. But after I pushed some numbers around came to the conclusion there was no there there.
The SS admin is very unlikely to close this "loophole" because it is NOT a loophole. There is no substantive benefit to doing it, and it doesn't cost SS anything when somebody does it. It's pretty much like trading ten dimes for a dollar bill.
As Burns or someone someone said a while back, this is the cheapest, most secure cola'd SPIA you can buy.
Yes, hence the title of the very first article on the topic: "Where can a 70-year-old buy the least expensive life annuity?"
But too many people read into this much more than what it really is. For someone who is in just the right circumstance it is the cheapest way to get this specific annuity. But that's it.
...[in rayvt's earlier post] last two sentences are the answer to why it isn't silly. And don't belittle the difference between deciding to take a larger payout when you are already near 70 and having to decide the issue at 62. SSA says a 62 YO has a life expectancy of 80.91. A 70 YO has a life expectancy of 83.3.....
Granted. But I still don't see the advantage. If your plan is to return the money when you hit 70, then by definition you didn't need it. So, you return money you didn't need in order to collect a higher payout--that you also probably don't need. But if you didn't need it at 62, then you could have just waited until you hit 70 in the first place.
Since you must save the payments so you can pay it all back, you don't really get any tangible benefit from collecting them.
What you mainly get is an intangible benefit---the fact that your heirs can keep the money if you die before paying it back at 70. The tangible benefit you get is keeping the interest the money will earn in the savings account. If you get 2% after tax (as if!!), you'd get a total of $8000 of interest in the 8 years from 62 to 70 for each $1000 of monthly benefit. At 1% net, you'd get $4000. These two benefits are better than a poke in the eye with a sharp stick, but they are trivial.
Here are some figures from an actual SS benefit statement:
Age 62, $1744/mo
Age 70, $3054/mo
Seems a significant difference until you do the math.
62YO living to 80.9 = 18.9 years = 277 months. Times $1744 = $483K
70YO living to 83.3 = 13.3 years = 160 months. Times $3054 = $488K
A $4K difference over a timespan of 20 years is trivial, and nothing to get excited about.
But if the person dies at, say, 75:
62 YO living to 75 = 156 mo. times $1744 = $272K
70 YO living to 75 = 60 mo. times $3054 = $183K
That $89K is a large amount of money at risk to lose out on. IMHO.