Social Security provides important retirement benefits for American seniors. In fact, according to the Social Security Administration, Social Security provides 50% or more of the retirement income for 37% of men and 42% of women. Thus, the very idea of “stopping” Social Security benefits seems foreign to many.
However, there are a few very good reasons why you might want to stop collecting Social Security. Here’s a look at what some of them are, along with an explanation of how you’d actually go about doing it.
Suspension of Social Security Benefits
Suspension of Social Security benefits is one of the two main ways you can stop collecting Social Security. To suspend your benefits, you’ll have to be at least “full retirement age,” which for those born in 1960 or later is age 67. You’ll have to notify the Social Security Administration either verbally or in writing. Once your benefits are suspended, they’ll automatically resume once you reach age 70. You can also resume them any time you wish by contacting the SSA. While your benefits are suspended, they will increase by 8% annually, up to a maximum of 24% from age 67 to age 70.
Withdrawal of Social Security Benefits
Withdrawal of Social Security benefits is an entirely different process than simply suspending them. You can withdraw your Social Security benefits at any time within the 12-month period after you’ve begun collecting them, which could be as early as age 62. However, if you withdraw your Social Security benefits, you’ll have to pay back all the money that you’ve already received. If you file for benefits at age 62 and then decide to withdraw them just before you turn 63, you’ll have to return a full year of payments. However, when you file for benefits again at a later date, the SSA will treat your application as if you never applied before. In other words, if you suspend your benefits when you’re age 63 and then refile at age 67, you’ll receive the full benefit you’re entitled to as if you filed for the first time at age 67.
Unlike with the suspension of benefits, you’ll need to make your request to withdraw Social Security benefits in writing. Specifically, you’ll have to mail or fax Form 521: Request for Withdrawal of Application to the SSA.
When Might It Make Sense To Stop Collecting Social Security?
Although it might seem unusual to want to stop collecting Social Security, there are a few notable reasons in which it might make sense. The primary one is if you decide you want to keep working. If you haven’t reached full retirement age and earn more than $21,240 in 2023, your benefits will be reduced by $1 for every $2 you earn above the limit. Your Social Security benefits may also become taxable. If you file taxes as an individual, you may pay taxes on 50% of your benefits if you earn at least $25,000, or 85% of your benefits if you earn more than $34,000. For joint filers, those income limits are $32,000 and $44,000, respectively. If you want to avoid both the taxation and temporary reduction of your benefits, you may want to suspend or withdraw your Social Security application.
Another reason to consider stopping your Social Security is if you can afford to wait. If you have a significant source of income or assets in your early 60s, you may want to wait to file until you reach age 70. This way you can maximize your monthly payout — an increase that is permanent — while you live off your other assets in your 60s. The same philosophy may apply if you are already collecting benefits from another source, such as spousal or survivor benefits. In this way, you can stop collecting your own benefits until they reach their maximum at age 70.
Sometimes, people suspend or withdraw their Social Security benefits because they didn’t fully understand the ramifications of filing early. While many retirees are eager to draw a Social Security check as early as possible, some don’t realize that this permanently locks in a monthly benefit reduction of up to 30% vs. claiming at their full retirement age.
The Bottom Line
Although most retirees will never file a suspension or withdrawal of their Social Security benefits, in some cases, it can make sense. The actual filing process is straightforward, requiring a verbal or written notification in the case of suspension or the submission of Form 521 in the case of a withdrawal. As altering your Social Security payout strategy can have long-term financial ramifications, it’s usually best to consult with a tax and/or financial advisor before taking either of these steps.
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