Starting Social Security then stopping then starting again

[RichardT153220]

 Lets say FRA is in April next year and I draw Social Security at that time. Now lets say after 3 months I learn that if I had waited till January when I could have drawn $200 more a month from Social Security. If I stop my Social Security draw after 3 months and then start it back up in January when my pay would be $200 more per month, if I pay back all of the money I had received, would I get the January increase?

RT 

[Tonster521]

@RichardT153220, Are you thinking about receiving Delayed Retirement Credits (DRCs) for approximately 6 months? If so, how have you developed the amount of $200/month as the DRC?

[GailL1]

@RichardT153220 

Yes, you can reverse your decision but there are rules in play that you must follow depending on whether or not you are LESS than FRA or AT or OVER FRA.  So just to highlight both for those who may read this.

LESS THAN FRA - deemed by SSA as a “WITHDRAWAL”  - 

SSA.gov- 03/13/2024- Can I withdraw my Social Security retirement claim and reapply later to increas... 

This has the procedure that ALL benefits have to be paid back for that 12 month or less period, including those that others maybe being paid off your record.

MORE specifically on the details:  SSA.gov- Cancelloing or WITHDRAWING your Benefits Application 

➡️  FULL RETIREMENT AGE BUT LESS THAN 70 YEARS OLD - deemed by SSA as a “SUSPENSION”⬅️

SSA.gov - SUSPENDINGYour Benefits Application   

IF you are FRA but not yet 70 years old, you will be SUSPENDING your Retirement benefits.  This is when you stop them to apply again later in order to get any Delayed Retirement Credits (DRC) you are due by NOT receiving benefits during these few years from FRA to 70 years old.

You do not have to repay benefits under a suspension but what you may have drawn up to the point of suspension will be recalculated out of your benefit so that you will not get any delayed retirement benefits on a few dollars of the benefit that you already received before you did the suspension.

Since Delayed Retirement Credits are ONLY applicable to the actual Number Holder (NH) and NOT to any other RETIREMENT benefits, what others might have received isn’t affected.  However, your widow or others who may receive your SURVIVORS benefits will have the DRC that you earn figured into their benefit. So to recap - DRC are NOT included in RETIREMENT benefits received by others under your number but DRC are included in all SURVIVORS Benefits that come from your number.

 Read carefully the (above linked) SUSPENDING Your Benefits Application SSA page and any other embedded links in the page cause the details are important.  It gets kind of complicated in how your Medicare Part B premiums are handled.

Delayed Retirement Credits are GREAT if you can wait to get your benefits or until 70 to get your benefits.  The current rate is 8% per year or equally divided by month.  SSA.gov - Delayed Retirement Credits  

The longer you wait past your FRA up until age 70, the bigger your benefit will be because of these DRC.  

However, I believe you may be miscalculating - and also misinterpreting when you get these DRC. Read the above link on SSA - DRC.  It takes awhile for the DRC to show up.  

ALL benefit increases STOP at age 70 but from your FRA to age 70 the DRC are calculated to your Retirement benefit up to the date you decide to draw them or age 70. But you will not actually see all of them in your benefit distribution until the following January.  

[RichardT153220]

 I used the sliding scale on the SSA page. As of April of next year with Cola added, I would get $3,590 a month before taxes. If I wait to January of 2027, I would get per the sliding scale on the SSA site, close to $200 more a month. But if I draw SSA in April then in January of the following year, I would have collected $28,720 in that time which means rather than waiting till January, I can just pull my SSA amount FRA in April. Since $28,720 is a lot of money that I can get in 8 months, I like that better than waiting till January to get $200 more a month.

[Tonster521]

@RichardT153220, Thanks for your reply. In your initial post I was using a nine (9) month period (May through January) less the three (3) months that you received SS Benefits or six (6) months of Delayed Retirement Credits (DRCs). DRCs are communicated at 8% per year by the SSA for simplicity and as an incentive to encourage folks to delay their SS Benefits. It is calculated by the month at 2/3rds of 1% (.006666667) which is a challenge for many folks to determine and would probably scare folks away from delaying SS Benefits. Anyway, you have now indicated that you are using an eight (8) month period of time ($3,590 X 8 = $28,720) for comparison analysis. Based on your SS Benefit ($3,590), your DRC is $191.46 per month ($3,590 X .006666667 X 8 months). FYI, nine (9) months would be $215.40. So, $200 is close enough for our discussion. Your question comes up time and time again which is OK because the SSA does not provide any analysis and most software programs and/or calculator are biased/focused on the amount of monthly benefit over a lifetime. Lifetime makes sense, but how long in years. Most of those programs/calculators use the SSA Actuarial Life Table (ALT) and assess a probability of living to 110 (males) and a little more for females. That approach saves them from making a mistake regarding selecting an age for any individual's life expectancy. There is nothing wrong using that approach and most software/calculators disclose those assumptions. However, many folks believe the results are "etched in stone" because they were developed by a computer. In reality, what are the chances for a male or female to live to 110? You can count on one hand. According to the ALT, the answer is 1 for males and 4 or females. The ALT which can be found at the SSA website bases the statistics on 100,000 lives which is standard actuarial analysis. So, it appears that you are electing SS Benefits at FRA or April and not delaying until January. I suggest you read my previous replies to GaiL1 were I pointed out the arithmetic regarding DRCs. In your case, giving up $28,720 for $191 per month more will take you 12.5 years to reach equivalency ($28,720 divided by $191). Moreover, I used 0% as the discount rate. Who earns 0%? If you use 3% which is the approximate discount rate that the SS program uses, it will take you about 16 years and about 2 months to reach equivalency or between ages 83 and 84. Using a 4% discount rate moves equivalency to ages 87 to 88. Using a 5% discount rate moves equivalency to the early 90's. I presented the ages in a range due to rounding $191.46 to $191.00 and compounding interest monthly. So, if you are savvy and can earn greater than 5%, you will need to live a long life, perhaps late 90's or even to 100. I suspect you can and will earn better than 3%. Good Luck.

[Tonster521]

@gail1, I asked Richard how he developed $200/month for 6 months of DRCs. It seems high for just 6 months. You are correct. He may be miscalculating. Or there is another factor. Anyway, electing $0.00 SS Benefits after attaining FRA takes a minimum of 12.5 years to recoup the loss of SS Benefits. For example, using 1 year of delay for a FRA 67  starts one at -100% and that loss is recouped at 8% per year or 12.5 years (100% divided by 8% is 12.5). Delaying for 3 years would start one at -300% and that loss is recouped at 24% per year which is 12.5 years. I used a 0% discount rate for arithmetic simplicity. Who earns 0%? Using 3% puts equivalency at 13 to 14 years depending on the method of compounding. So, one thinking about delaying to obtain a greater monthly SS Benefit also need to think about life expectancy. Folks who are financially savvy earning 5% or more need to live into their 90's to recoup the upfront loss of delaying SS Benefits. This is the time value of money. It is why SS benefits are reduced if one elects prior to FRA or increased if one delays after FRA. Hope this helps.

[GailL1]

@Tonster521 

Yes, I don’t understand the $ 200 increase - does seem very high for just those few months.

Maybe he is talking about suspending his benefits at FRA and then reapplying in January of the next year and then asking for a 6-month back payment - this can be done but not with any DRC bonus amount. It would just be a 6-month backpay.  OH Well, he will just have to explained.

I am a rules person with an emphasis on the logic basis of the rules.  I have to rely on you for the numbers.  

However, I do believe that you may be missing another very important part of the DRC and that is the benefit that it brings to the Survivors of the NH (number holder).  I do not know if that would change your analysis.  

[Tonster521]

@gail1, This is a follow up to my previous reply which date stamped 11-17-25 10:21AM. At the end of that reply, I mentioned that I was planning on replying to your second reply to me date stamped 11-16-25 12:03PM because I believed I was running out of time in the AARP system. That happens to me from time to time and I need to log out and log back in. Well I did that and your reply 11-16-26 12:03 PM is no longer available. In fact, it advised that access was denied. Anyway, as I recall, you were essentially asking for clarification why someone would elect SS Benefits payable at age 62 when their FRA is 67. That is a 60 month period of reduced benefits versus the FRA 66 where it is only a 48 months period of time. One explanation is the time value of money. Granted, one is receiving a lower actuarial adjusted amount, but is receiving that amount for 60 months as opposed to electing $0.00 for 60 months. If one elects $0.00, they obviously have other assets/funds that are used in lieu of SS Benefits. So, that cost of using other assets and the cost of the lost earnings on those other assets may exceed the actuarial reduction. In that case, one has more value using SS Benefits and letting their assets compound to greater values. 

Many folks only compare monthly amounts and do not use the time value of money. In that case, they are comparing an actuarial reduced amount with a full SS Benefits. They are not on level ground. IOW, they are comparing apples and oranges. Also, some folks who do not have other assets that may provide them with a financial strategy/alternative to provide the best value when they stop working, will elect SS Benefits as a source of income. Unfortunately, for many folks, it is their only source of income. I am sure their are additional reasons why folks start actuarial reduced or delay SS benefits. We (including all readers) have read their logic which does and does not not make financial sense, but to them, it works and is doable. Let me know if you need anything further. I hope it is not my old software preventing me from accessing your reply.

[Tonster521]

@gail1, Richard provided pertinent info regarding his post and I replied based on the info he provided. I hope most readers will understand the time value of money concept. The SS program uses that concept to provide folks with options for selecting their SS Benefits. Essentially, our Primary Insurance Amount (PIA) is developed at FRA. That amount can be paid Early with an actuarial reduction, at 100% at FRA, or Delayed with an actuarial increase but only up to age 70. The SSA informs us that all amounts are actuarial equivalents (or very close) based on average life expectancy (gender neutral ages 83 to 84) and an approximate  3% discount rate. I believe we (meaning everybody) can control the discount rate which is essentially a rate of return we earn. However, life expectancy is the variable that is the challenge. So, I agree that for some folks Survivor Benefits should be considered. However, for married folks with close to equal Covered Earnings, Survivor Benefits may not amount to much. Life Insurance may be a better solution for those married couples. With Life Insurance one can name Contingent Beneficiaries (i.e., children, grandchildren, etc.). Your spouse is the only beneficiary under the Survivor Benefit provisions of the SS program. There may be some provisions for disabled adult children, but I am not sure.  I will respond to your other reply. I believe I am running out of time since I replied to both you and Richard. Sometimes, I have to log out and log back in. It could be my old computer and old software. Thanks for your positive comments.