Borrowing Money From Social Security Interest-Free

A loophole that created a "loan" from Social Security was closed in 2010

Social Security cards
••• Douglas Sacha / Getty Images

It was once possible to start collecting Social Security benefits at age 62, the earliest possible age, and then, at the age of 70, repay all the money you'd received from the Social Security Administration (SSA) and refile for benefits as if you'd never gotten a single check.

Because you were now older, the amount of your monthly check would be higher, and all the cash you had received over the years from the SSA was like an interest-free loan from the government.

That loophole was closed in 2010 so you can no longer "borrow" money from the SSA for a number of years.

If you file for benefits before age 70, you now have only 12 months after you start receiving benefits to decide to suspend them until a later date. If you do decide to suspend your benefits, you must still repay the money you have received.

File and Suspend for Married Couples

Another way of getting extra money from the SSA—this one involving married couples—was permitted for a few more years.

Known as "file and suspend," this practice involved the higher-earning spouse applying to receive Social Security benefits as soon as they reached their full retirement age (FRA). This also allowed their spouse to begin collecting spousal benefits, worth half of the filer's benefits.

Full Retirement Age
Year Your Were Born Full Retirement Age
1937 or earlier 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

The filer would immediately suspend their application to receive benefits, but the spouse could still continue to collect spousal benefits. At the age of 70, the original filer would begin collecting their benefits at a higher rate.

"File and suspend" enabled a couple to come out many thousands of dollars ahead partly because spousal benefits reach their maximum value at the spouse's FRA, unlike an individual's own benefits, which reach their maximum value at age 70.

The Bipartisan Budget Act of 2015 prevented retirees from filing and suspending by making it so a spouse's benefits were automatically suspended at the same time as the person making the suspension request.

One exception to this rule is that divorced spouses may continue receiving benefits.

Current Withdrawal Requirements for Social Security

The 2015 law still enables retirees to stop taking Social Security payments if they desire. For example, if you get a new job or inherit money after you start taking Social Security, you may want to suspend your benefits.

Delaying taking your Social Security benefits—and your spouse's, if you are married—until you reach the age of 70 will allow you to receive a larger benefit at that time.

If you delay taking Social Security benefits until after your full retirement age, you are eligible for delayed retirement credits that increase your monthly benefit.

To withdraw your application to receive Social Security payments, you must:

  • Have reached your full retirement but not yet be 70 years old
  • File form SSA-521 within 12 months of your request to receive the benefits
  • Repay all the benefits you and your family received based on your initial retirement application

Repayments must include money withheld from your Social Security check for Medicare Part B, C, or D premiums; voluntary federal income tax withholding for closed tax years; and any garnishments, such as for child support. Once your withdrawal application has been approved, you have 60 days to change your mind.

You can withdraw your application for benefits only once in your lifetime.

Penalties for Receiving Payments Early

You can begin taking Social Security payments at the age of 62, but they will be reduced based on the number of months that will have to pass before you reach full retirement age.

If your FRA is ... ... and you start benefits at age ... ... your benefits will be reduced by ...
66 62 25 percent
66 63 20 percent
66 64 13.3 percent
66 65 6.7 percent
67 62 30 percent
67 63 25 percent
67 64 20 percent
67 65 13.3 percent
67 66 6.7 percent

The rationale for the reduction in monthly payments is that someone living to the average life expectancy will receive the same total amount of money regardless of when they retire.

Article Sources

  1. Social Security Administration. "Benefits Planner: Retirement: If You Change Your Mind." Accessed Mar. 23, 2020.

  2. Social Security Administration. "Benefits Planner: Retirement: Voluntary Suspension of Benefits (Also Called “File and Suspend”)." Accessed Mar. 23, 2020.

  3. Social Security Administration. "Bipartisan Budget Act of 2015 Closes Social Security Loophole." Accessed Mar. 23, 2020.

  4. Social Security Administration. "Benefits Planner: Retirement." Accessed Mar. 23, 2020.