The SSA provides a few ways for retirees to maximize their benefits. One lesser-known option is the SSA-521 clause. The SSA-521 clause allows individuals who have taken early Social Security benefits to withdraw their application for these benefits, in essence giving them a second chance to increase the retirement payout. This article will discuss exactly how the SSA-521 clause works, its benefits, and what circumstances surround its use.
What is the SSA-521 Clause?
That means there is a provision-the SSA-521, better known as “Request for Withdrawal of Application” that provides a way for people to withdraw their Social Security benefit claim within 12 months of approval. Now, this lets retirees stop receiving benefits, which then enables monthly benefits to grow at a much faster rate-up to 8% per year-until they attain age 70. So it could increase the total amount received over a lifetime, thereby being quite appealing to many retirees.
Why would anyone use SSA-521?
Thousands of retirees, due in part to economic need, take early Social Security at age 62, for instance and this permanently reduces their month-to-month payment amount. In fact, recent reports state that roughly 65 percent of all retired workers take benefits before their full retirement age; doing so often locks in lower lifetime earnings from Social Security.
The SSA-521 clause can be a financial life ring for those who later find themselves in better financial situations, such as securing a well-paying job or realizing they could have delayed benefits for a larger payout. Thereby, they withdraw the application, the reduced payments would cease, and their benefits would grow. This will increase monthly income when they decide to reapply.
Key benefits of SSA-521 clause
- Larger monthly benefits: Retirees, by withdrawing, can allow their benefits to grow as much as 8% per year until age 70. This could translate into a significantly higher monthly benefit than the person would have otherwise been taking, versus continuing on early payments.
- Flexibility: This is an added advantage to retirees through the clause SSA-521, should one hurriedly make up their mind on what to do with their benefits. The life circumstances may change, and the clause offers room for adjustment depending on new financial realities.
- Financial planning tool: For the ones who may have started benefits out of financial necessity, SSA-521 does provide an opportunity to reconsider and improve one’s retirement strategy. It calls for long-range reflection on one’s financial life.
Limitations and conditions
Although the SSA-521 clause has enormous advantages resulting from it, there is also some significant limitation to:
- Time limitation: The application can be withdrawn on request by an individual within 12 months of initial claim approval. If one has been on benefit for over a year, then this option is not available to them.
- Repayment requirement: Retirees must repay all of their benefits, but also those their spouse or children received due to one’s earnings history. For some, this is quite an expense.
- One-time use: One can apply the SSA-521 clause only once. If an individual withdraws his application and then decides to claim benefits later, the option of doing so cannot be used again the second time.
The SSA-521 clause serves as something of a golden key for retirees who may later regret taking their Social Security benefits early. This provides an avenue to withdraw the application for greater payouts down the line, thus enhancing financial-secured retirements; however, retirees should be cognizant of the various limitations and requirements of this avenue.
