We love a good loophole as much as the next person. We have one in particular that might surprise you more than you think. If you are keen on sophistry, then Social Security’s most unknown loophole is bound to leave you feeling quite clever and pleased. By implementing this deliciously creative loophole, you could significantly boost your monthly Social Security payments even after you started claiming your benefits – yes, it is legal!
The most unknown loophole to boost your Social Security payments
Many American citizens already know that Social Security is an essential income source, especially after retirement. Unfortunately, retirement costs have notably increased, leaving many elders experiencing financial hardship and trying to squeeze as much as possible from their benefits.
There might be several ways to increase benefits before filing claims, but not many people know of the most unknown loophole that could boost their monthly payments, even after they started claiming. Normally, after you start claiming Social Security, your monthly benefit grows by an annual cost-of-living adjustment, or COLA, at the same rate for all beneficiaries.
However, this loophole will allow beneficiaries who claimed benefits early to suspend their benefits once they reach full retirement age. This little “redo” can be done within the 12 months of filing, after which you can file again whenever you choose to.
The benefits of using this loophole
Per the 2024 report from the Nationwide Retirement Institute, almost 75% of American adults do not know that they may “change their minds” after claiming benefits. If you delay your benefits for a year or two, it may significantly boost your monthly payments.
Each month that claims are delayed past age 62, your checks will increase slightly. Everyone born in 1960 or after may collect 100% of their benefits at their full retirement age of 67. If they delay claiming their benefits past 67, they will collect an additional monthly bonus with their full payment.
According to the SSA, birth years will determine the full retirement age (FRA), which is indicated below:
- Born 1943-1954 – FRA is 66
- Born 1955 – FRA is 66 +2 months
- Born 1956 – FRA is 66 +4 months
- Born 1957 – FRA is 66 +6 months
- Born 1958 – FRA is 66 +8 months
- Born 1959 – FRA is 66 +10 months
- Born 1960 and later – FRA is 67
This is how much your benefits could increase if you decided to implement the loophole
Filing claims at various ages can make a big difference for many people. People with a FRA of 67 who claim at 67 will receive 30% more benefits than if they were to claim at 62. If those same people waited until 70, their benefits would be an additional 24% higher.
These increased monthly benefits add up to hundreds of dollars for many beneficiaries. Per the SSA, the typical retiree would receive $740 or more per month at 70 than at 62. Even delaying for three years until 65 could mean a difference in benefits of around $265 per month for the typical retiree.
This loophole is not for everyone! Remember, this loophole will increase your monthly benefits, but your lifetime benefits remain unchanged, no matter when you begin filing claims. The earlier you claim, the more checks you will receive for your lifetime, but the checks will be lower. The later you claim, the higher your checks will be, but the total checks received for your lifetime will be less.
In the end, it all remains up to you. If you believe you’ll live longer than average lifespan, you could benefit more by delaying your claims, especially if you have a nice little nest egg for your retirement or have received a nice inheritance. But if your general health is subpar, and you believe you’ll live shorter than the average lifespan, you could benefit more by claiming earlier. Be mindful, the benefit reduction by filing early is permanent and will last the rest of your life.