Repay and Apply for a Higher Social Security Check Before It's Too Late

Using Social Security's 521 form, millions of elderly who opted to take Social Security prior to age 70 can raise their sustainable living standards by repaying all the benefits they've received in the past and reapplying for higher benefits.
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Using Social Security's 521 form, millions of elderly who opted to take Social Security prior to age 70 can raise their sustainable living standards by repaying all the benefits they've received in the past and reapplying for higher benefits. The required repayment is gross of the Medicare Part B premiums paid in the past.* Bummer. On the other hand, no interest is charged on the repayment. And, get this, the repayment is tax deductible.

For people close to 70 who took their benefits early (e.g., at age 62), this can be a very big deal.

But if you are in this boat, you best move quickly. Social Security is considering closing down this option. Changes could come either through regulation or legislation. But it's certainly on the Social Security Administration's agenda to eliminate this provision, which the agency considers a loophole.

How much would you gain from this strategy? My company's download programs, available at, can calculate your potential living standard gains.**

Here's an example: John, age 68, lives with his wife Sue, age 62, in Connecticut. John worked in retail after college. His first job paid $30,000 a year. When he retired at 62, he was making $168,000. Sue stayed home and raised the kids. The couple saved diligently and has $300,000 in regular assets and $600,000 in retirement accounts.

John is now receiving Social Security benefits of $21,489, which he started collecting at 62. Sue is receiving a Social Security spousal benefit of $9,815.

After paying taxes and paying their Medicare Part B premiums, their spending power, according to ESPlanner, is $63,505. This is what the couple can spend each year until John reaches age 100 (his maximum age of life) over and above covering their taxes and Medicare Part B premiums. After John reaches his maximum age of life (if he's so lucky), Sue's discretionary spending drops to $39,691 which provides the same living standard assuming, as we do, that two can live as cheaply as 1.6.

If John repays $117,354 and takes the tax deduction, he'll be able to receive a 73 percent higher benefit of $37,111 for thirty years, if he lives to 100. This raises the couple's sustainable spending from $63,505 to $72,908, or by 13.5 percent!

Earth to the elderly in this general boat: This is a 13.5 percent hike in living standard for every year for the rest of their lives! To achieve the same increase in sustainable spending the couple otherwise would need an extra $240,000 in regular (non-retirement account/taxable) assets!

If John not only repays and reapplies at 70, but Sue also waits until age 66 -- her full retirement age -- to collect her spousal benefit, her benefit rises to $13,939 (in today's dollars), and the couple's spending power rises from $72,908 to $74,667! Compared to where they started, this is the same as finding not $240,000, but $310,000 on the sidewalk!

But what about the kids? If John drops dead two minutes after writing the $117,354 check, the money is gone. Neither Sue nor their children will get it. On the other hand, if John dies before his maximum age of life (assumed to equal 100), he takes away a mouth to feed. And, as ESPlanner's survivor reports show, in this case, Sue will have a higher living standard than had John not died. She'll also receive 100 percent of John's now higher benefit. (Even if John dies before he reaches age 70 and starts collecting retirement benefits, Social Security will give Sue his full retirement benefit adjusted for the delayed retirement credit up to John's date of death.)

So repaying and reapplying pays off in terms of much larger survivor benefits for Sue even in the two-minutes later death scenario. For example, if John dies at any time after age 70, Sue will begin receiving $37,111 per year for the rest of her life. Had John not repaid and reapplied, Sue would receive only $21,489 per year until she died.

In short, Sue is well taken care of. So what about the children? Well after securing a higher living standard for themselves, John and Sue are free to give their children immediately whatever they feel is appropriate in direct gifts. In this manner, John and Sue not only reduce the prospects that their children will need to help them out financially. They also provide their children with more certainty about what they will receive. So repaying and reapplying can be a win-win situation for everyone.

There is a general point here that applies apart from the issue of Social Security, namely that our kids are not insurance companies and using them as insurance companies should be avoided if at all possible.

Warning note: Many elderly have visited their local Social Security offices or called them and been told there is no option to repay or to reapply. Or they've been told they can't do this after age 70. This is incorrect. This option is available at all ages, until it is revoked. There is, however, no reason to wait until after age 70 to reapply, since the maximum benefits are earned at age 70.

If the local office gets this wrong, have them call Social Security's Office of the Actuary, which will set them straight. Social Security has 2,728 rules in its Handbook and thousands of rules in its Program Operating Manual System that explain the 2,728 rules. The system is so complex that three offices can easily give you three answers to the same question.

* This means what you need to repay is more than what you actually received in checks from Social Security in the past. The reason is that the Medicare Part B premium was deducted from those checks.

** In using ESPlanner to determine the living standard gain, you first just run yourself through the program assuming you don't elect to repay and reapply, next you run yourself again assuming you do so elect, and then you compare the two living standards. When you run the program assuming repayment, enter the repayment (Social Security will tell you the amount) as a tax deductible special expenditure and tell the program when you'll start collecting again. This tells the program to internally calculate your higher benefit. Also, you'll need to enter your earnings history, which is available from

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