Hey, retirees: Looking for a way to bring in more money? Give back all the Social Security checks you have received so far. An often-overlooked provision allows Social Security recipients to withdraw their original application for benefits and to refile. For many retirees already collecting benefits, the strategy—known informally as a "Social Security reset"—could sharply increase their monthly income. The reset strategy works because the Social Security system is wired to grow more generous the later one starts taking benefits. If you begin taking them early, meaning before your so-called full-retirement age, your benefit check shrinks by as much as 30%, depending on your year of birth. But for each year beyond full-retirement age that you still haven't claimed benefits, you earn credits of generally between 7% and 8% a year.
The strategy is particularly useful for retirees considering buying an immediate annuity, which, in return for a lump sum of cash, provides an immediate stream of monthly checks generally set up so a retiree won't outlive the money.
In most cases, "the income from resetting Social Security will greatly exceed the annuity income," says Charles Ryan, a certified financial planner in Annapolis, Md., who recently described the strategy in the Journal of Financial Planning.Determining on your own whether a reset will benefit you is a challenge because of the tax calculations and other issues. The best advice: Find a financial planner who understands this, or who has access to a computer program called ESPlanner that Mr. Kotlikoff helped design.
Learn more about this strategy in the Wall Street Journal
William Wombacher, your Central Illinois Disability and Certified Elder Law Attorney (CELA)