Delay, delay, delay. That's what most experts advise when it comes to claiming Social Security retirement benefits. By waiting to claim your benefit until after full retirement age -- which for older baby-boomers is 66 -- you can earn delayed retirement credits of 8% a year until you reach age 70.
Of course, many people choose to take benefits sooner rather than later -- even as early as age 62, receiving only 75% of what they would get every month by waiting until full retirement age. But sometimes circumstances that precipitated the decision change. Perhaps you took benefits early because of a layoff, but you've finally found a new job, or an opportunity arose that brought you out of retirement. Or maybe you simply regret the smaller benefit check you're potentially stuck with for the rest of your life. If you took benefits early but now wish you hadn't, you still have several options to boost your benefits. Consider these moves:
Withdraw and Repay
Until a few years ago, you could take your benefit early, change your mind years later, repay all the money you had received (without interest!), and then restart your benefit at a higher amount. But with concerns about Social Security being used as a source of no-interest loans, the Social Security Administration clamped down on those once-generous rules.
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But the option is still available in a more restricted form. Within 12 months of first claiming benefits, you can file Form SSA-521, "Request for Withdrawal of Application." You will have to repay all the benefits you received, including any spousal benefits. You can then restart benefits in the years ahead as your benefit level rises with age. Note: You are limited to one withdrawal of your application.
Exceed the Earnings Limit
The "earnings test" has long been considered a bogeyman when it comes to claiming benefits early: If you take benefits before full retirement age and you earn more than the annual limit ($15,120 for 2013), you will give up $1 of benefits for every $2 you earn over that limit. In the year you hit full retirement age, you'll forfeit $1 of benefits for every $3 you make over a higher earnings limit ($40,080 for 2013). Once you hit full retirement age, you can make as much as you want with no impact on benefits.
But for early claimers interested in boosting their benefits, this bogeyman isn't so bad. That's because the loss of those benefits is temporary and the benefits forfeited now will narrow the permanent reduction to your lifetime benefit later on. Once you hit full retirement age, the Social Security Administration will recalculate your benefit, taking into account the amount you forfeited, and adjust your monthly payment upward.
For example, let's say you start benefits at 62 but have 12 months' worth of benefits withheld because of the earnings test. At full retirement age, the Social Security Administration will recalculate your lifetime monthly benefit as if you had claimed three years early instead of four years.
Replace a Zero
Your Social Security benefit is based on the highest 35 years of earnings in your work history -- including any years of earnings you rack up while taking benefits. The Social Security Administration annually reviews the earnings records of beneficiaries who are still working. So if you take your benefit early but continue to work, your benefit will continue to climb if your annual earnings top the earnings of another year.
If you have, say, only 30 years of earnings and five years in which you had no earnings, a year with any amount of annual earnings would replace one of those zero years -- and that would increase your lifetime monthly benefit amount. For example, a woman who left the workforce for a few years to care for young children could boost her benefit with even a part-time job if those earnings replaced a zero year.
Suspend Your Benefit
The strategy of filing and suspending typically applies to couples. But suspending a benefit can also help early claimers boost their own benefits down the line. If you took benefits early, you can choose to suspend your benefit once you hit full retirement age. You will stop receiving payments, but you will then earn delayed retirement credits of 8% a year until age 70.
Such a move mitigates the permanent reduction of claiming benefits early. Let's say at your full retirement age you would have received $2,000 a month. But you claimed early at age 62, reducing your lifetime benefit by 25%, to $1,500 a month. At age 66, you could decide to suspend your benefit to earn delayed retirement credits of 8% a year. If you then waited until age 70 to reapply, your lifetime monthly benefit would be $1,980, plus four years' worth of annual cost-of-living adjustments.
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