Strategies for Clients Who Regret Claiming Social Security Early

Written by: Marshall Heitzman, CFP®, ChFC, FLMI, CPCU, BFA™

Mar 23, 2021 Share This 

Social_Security_RegretsThe events of the past year have had a significant economic impact on many families. In particular, the rate of unemployment for those aged 55 and older reached a staggering 13.6% in April of 2020, recovering to 6% by the end of the year.1

Chances are, some of your older clients were among those laid off, downsized, or temporarily furloughed, forcing them to make financial decisions that might not have been made otherwise, interrupting or at least changing their retirement plans.

Most notably, clients over age 62 may have claimed Social Security benefits earlier than anticipated and may now regret that decision as the economy improves, and they have the potential to return to the workforce.

It’s common knowledge that taking Social Security prior to full retirement age may lock in lifetime benefits at a reduced monthly payment. That income gap is even more significant compared to those who wait until age 70.2 But among the Social Security myths that some people believe is that there’s nothing they can do about claiming benefits too early.

However, there are some little-known options to reverse or change a decision for those whose employment circumstances have improved in the last year.

Withdrawing a Social Security Application

If it has been less than 12 months since a client claimed Social Security benefits and they regret their decision, they can revoke their claim as if it never happened. Those who wish to have a do-over on their own timeline must formally request to withdraw their application through Social Security using form SSA-521, but there’s a catch. Recipients must repay the total benefits they and their family received since first applying, and they are limited to only one withdrawal request in their lifetime.3

Paying back Social Security payments is obviously more difficult for those who claimed 11 months ago than it is for those who started receiving benefits more recently. But since claiming Social Security as early as possible results in a “permanent” benefit reduction that could be close to 30% for some, it may be worth redirecting some assets to reverse course.2

Plan B — Suspend Social Security

What if someone misses that 12-month deadline, or they don’t have the assets to pay back what they’ve already received? Or maybe it took longer than a year to get their feet back under them and find employment? There is a Plan B that may be available.

They may be able to utilize a strategy to suspend their Social Security benefits and take advantage of available delay credits starting at their full retirement age (65-67 depending on year of birth).4 Someone with a full retirement age of 66 could capture a full 8% increase on their income payments per year up to age 70, if they defer for that long.5 That same person could increase their lifetime income payout by 32%, for example, by suspending Social Security for four years.5 Those early, reduced payments might be restored to the higher amount for life, which may replace much of the monthly income forfeit from claiming benefits earlier than expected.

Reaching out to clients for a check-in may be prudent, especially for those nearing retirement age. If a client’s income plan has changed, as it has for so many this past year, discuss options that make sense. Timing is important, so don’t delay.

In light of their changing circumstances, it may also be an opportune time to review their portfolio and assess the role that annuities may play in their retirement strategy. Even with maximizing benefits, they may still experience a Social Security shortfall. The uncertainties of this past year may have caused some to rethink their risk tolerance, making them more likely to appreciate the guaranteed income and security that annuities offer.

Our online guide, Are Your Clients Facing a Retirement Income Crisis, is available to help you better understand the situations many older Americans face and how you can strategize next steps. Click the link below.

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Marshall Heitzman
Written by: Marshall Heitzman, CFP®, ChFC, FLMI, CPCU, BFA™

Marshall is CUNA Mutual Group's Advanced Planning Expert and has more than 25 years experience in the insurance and financial services industry. He consults Financial Advisors on advanced retirement planning concepts for retirement and wealth management clients.


1U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, January 8, 2021.
2Social Security Administration, When to Start Receiving Retirement Benefits, January 2021.
3Social Security Administration, Retirement Benefits: Withdrawing Your Social Security Retirement Application, No date.
4Social Security Administration, Retirement Benefits: Suspending Your Retirement Benefit Payments, No date.
5Social Security Administration, Retirement Benefits: If you were born between 1943 and 1954 your full retirement age is 66, No date.


Topics: Advanced Planning