When Does It Make Sense to Stop Benefits?
You may want to pause SSA payments if:
You Have Not Yet Reached Your Full Retirement Age (FRA)
You can start getting paid your full SSA benefit amount at your full retirement age (FRA). This is based on your birth year. For instance, suppose you were born in 1957 and started getting benefits at age 62. You would get a lower amount than at your FRA of 66 years and 6 months. If you start getting payments too early and later learn that you could have locked in a higher amount, you may want to pause your payments for a few years.
You Want to Receive Delayed Retirement Credits
If you delay your retirement until past your FRA but before you turn 70, you can get delayed retirement credits. These credits can slightly boost your monthly payout. For instance, if you were born in 1943 or later, you could get an 8% yearly increase in the primary insurance amount of your benefit, which would result in a payout increase of two-thirds of 1% every month. So, you may want to stop payments and restart them after a few years.
You Start Benefits While You Work and Earn Too Much
Suppose you started getting SSA checks before your FRA and later decide to head back to work. You may want to stop payments if your earnings exceed the earnings limit, which would result in a lower payment. For instance, if you’re under your FRA throughout 2021, the SSA will deduct $1 from your benefits for every $2 you earn over $18,960. If you reach your FRA at any point during 2021, the SSA will take out $1 for every $3 you make above $50,520 until the month before you reach your FRA.
You Want to Lower Your Taxes
If your income is between $25,000 and $34,000 as an individual or between $32,000 and $44,000 as joint filers, you may pay tax on up to 50% of your SSA benefits. If you earn above the upper limit of these ranges, you may pay tax on up to 85% of the amount you receive. Pausing payments during the years when you know you will earn a high income can result in less taxable income in that period, which may allow you to convert traditional IRA assets to a Roth account. You may also be able to realize capital gains without taking a large tax hit.
When Can You Stop Social Security Benefits?
The SSA provides two methods for stopping benefits. The approach you take depends on when you choose to pause:
Withdraw Benefits
You can withdraw your Social Security claim within 12 months of starting benefits.
Suspend Benefits
If you aren’t eligible to withdraw your claim but have reached your FRA and have not yet reached age 70, you can choose to suspend payments.
How to Stop and Restart Benefits
Once you have made the choice to pause payments, you will need to put in a formal request with the SSA. Here’s how to do it:
To Withdraw Benefits
Complete Form SSA-521, stating the reason you want to withdraw, and send it to the SSA. The SSA will notify you of your approval. You will have 60 days from the approval to cancel the withdrawal. You can re-apply at a later date.
To Suspend Benefits
Make an oral or written request to the SSA to stop payments. You must contact the SSA orally or in writing if you want to restart payments before age 70. The month you turn 70, the payments you opted to suspend will be reinstated.
What Happens When You Stop Benefits
Before you contact the SSA, learn about the impacts of your choice. They may include:
SSA Benefit Repayment
If you withdraw your application, you must repay what you have received so far. Be aware that this also includes payments made on behalf of your spouse or children. If you do not pay back the money, it can be taken from your tax refunds or even future SSA payments. If you spent some or all of the income you received, think about whether you can afford to pay it back.
Medicare Benefit Repayment
You can also opt to withdraw from Medicare when you withdraw from SSA benefits. You don’t have to do this, but if you choose to withdraw from Medicare, you will also have to repay Medicare Part A benefits. If you had taxes withheld from your SSA payments for past tax years, you will also need to pay this back to the SSA. The SSA paid these taxes on your behalf, and now you need to pay the SSA back. That money went to the IRS, but SSA is owed the entire amount because they are two separate entities. You may be able to get this money back from the IRS by reporting it in your future tax return.
Changes in Other Benefits
If you are entitled to railroad or veteran’s benefits, stopping your SSA checks may affect those payments. Check with either the Railroad Retirement Board or the Department of Veterans Affairs to find out whether stopping SSA payments would have an impact on your other payments.
Suspension of Others’ Benefits
Most of the time, if other people, such as a spouse, claim payments based on your record, their payments will also be suspended.
Social Security Income (SSI) Benefit Suspension
If you currently collect both SSA retirement and SSI benefits, stopping SSA payments suspends your SSI benefits.
The Bottom Line
If your payment start date or age permits you, you can stop your SSA benefits. Later, you can re-apply for them or restart them to get the highest payments and pay lower taxes on them. Only take the plunge after considering the impacts of the decision. This is especially important if you have limited income sources in retirement. Working with a financial advisor can help you assess the personal and financial repercussions of pausing Social Security.
