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Welcome to the Retirement Learning Center’s (RLC’s) Case of the Week. Our ERISA consultants regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, Social Security and Medicare. This is where we highlight the most relevant topics affecting your business. A recent call with a financial advisor in Kansas is representative of a common question on Social Security planning.
The Social Security Administration does have a process that allows eligible individuals to withdraw their benefit application for up to 12 months after benefit approval. A person can only cancel their application once and be able to reapply later.
The situation at hand involved a 62-year-old emergency room nurse who decided to retire because shift work had become too difficult. She filed for Social Security and shortly thereafter gave her employer a 30-day notice. After some discussion with her employer, and to her surprise, she was offered a new position with better hours, which she accepted.
Because she will continue to work, the retirement earnings test (RET) will impact her Social Security benefits. The RET applies to individuals who claim Social Security benefits before their full retirement age. Under the RET, individuals may earn up to $23,400 with no effect on their benefits. However, for each dollar earned above the limit, their Social Security benefit is temporarily reduced by one dollar. (Note: these benefits are not lost, just delayed.) Because her compensation is substantially above the $23,400 RET limit, her Social Security benefits would be reduced to zero until she attained full retirement age.
Because of the RET rules, she wanted to stop her Social Security benefits. Fortunately, individuals have a one-time option to withdraw their Social Security application if they meet several conditions. The conditions include
Filing a withdrawal request within 12 months of benefit eligibility,
Completing Form SSA-521, Request for Withdrawal of Application, and
Paying back any benefits already received.
She met these conditions, filed the form, and successfully withdrew her Social Security application.
Conclusion
Sometimes a Social Security “do over” makes sense. The Social Security Administration has a process that allows eligible individuals to withdraw their benefit application for up to 12 months after benefit approval.