NCPA - National Center for Policy Analysis


August 26, 2008

A Social Security provision allows retirees to reapply for their benefits, says Laurence J. Kotlikoff, a senior fellow with the National Center for Policy Analysis and a professor of economics at Boston University.

Form 521 (Request for Withdrawal of Application) as well as IRS provisions permit an individual to: 

  • Repay the Social Security retirement benefits received with no interest charged;
  • Claim an income tax credit for past Social Security benefit taxes paid; or
  • Deduct the amount of the benefits that have been taxed from taxable income (if itemizing).

Once you repay what you owe, you can immediately reapply for higher benefits.  Along the way you will have benefited from an interest-free loan, explains Kotlikoff!

Consider retirees Peter and Kate, both of whom are now 70:

  • Peter and Kate claimed their Social Security benefits at age 62 and are now each receiving a reduced benefit of $13,250 each year (in 2008 dollars).
  • Had they waited until their normal retirement age (65 in their case) to collect benefits, Peter and Kate would now each receive $18,928 a year.
  • Had they waited until age 70 (this year) to apply, their benefit this year would have been $20,693, thanks to the delayed benefit credit.

Peter and Kate now have a choice.  They can choose to pay back the Social Security benefits they have received over the past eight years.  In return they will each receive the much higher benefit for the rest of their lives.  If they take this option:

  • Each would repay $94,556 to Social Security.
  • They would then each begin receiving $20,693 a year -- the same as if they had waited until age 70 to begin receiving benefits.
  • As a result they would have approximately 56 percent more in real Social Security benefits every year for the rest of their lives.

Source: Laurence J. Kotlikoff, "Double-Dipping Social Security," National Center for Policy Analysis, Brief Analysis #625, August 26, 2008.

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