Social Security Dramatically Changes Withdrawal of Benefits Option

Last week the Social Security Administration issued a change to the infamous ” interest free loan loop hole” that allowed folks to payback benefits received get a higher monthly Social Security payout.

This option was called “Voluntary Withdrawal of Benefits Form SSA-521”, which you may have heard about with various teasers on the internet about the secret loophole that allowed you to get a higher SS benefit each month.  This strategy wasn’t a loophole at all but in actuality a seldom used technique that was completely legitimate with the SSA.  The scenario worked like this:  You claim SS benefits early but then around age 70 realize that you didn’t really need the money which has accumulated in a savings account.  By returning everything that the SSA had paid out, you could then refile for Social Security benefits based on your current age(which at age 70 is 132% of your full retirement benefits).  So in essence you got an interest free loan for many years from the SSA and then you get a higher monthly benefit going forward.  But like all good things – it has come to an end.

Citing to much publicity about the “interest free loan” and the limited resources of its staff the SSA has issued immediate changes to the Voluntary Withdrawal of Benefits option.  Effective immediately the time limit is 12 months to withdraw benefits from the time you start receiving.

About the author

James A. Daniel, CFP®

James Daniel, CFP is the owner of The Advisory Firm, LLC a fee-only financial planning practice located in Alpharetta, Georgia.

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  • I have heard that I can maximize my social security return by taking SS early but banking the money in the SS program, How does this work and is it legitimate. Thanks

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