If you have filed for Social Security retirement benefits, you may be able to pause them for a time if you meet certain requirements. Learn the rules that allow you to stop benefits and restart them when desired.
When Does It Make Sense to Stop Benefits?
You may want to pause Social Security payments if:
You Have Not Yet Reached Your Full Retirement Age (FRA)
You are entitled to your full Social Security benefit amount at your full retirement age (FRA). This is based on your birth year. For instance, let's say that you were born in 1957 and started benefits at 62. You would get a lower amount than at your FRA of 66 years and 6 months. If you start benefits too early and later learn that you could have locked in a higher amount, you may want to pause Social Security for a few years.
You Want to Take Advantage of Delayed Retirement Credits
If you delay your retirement until past your FRA but before you turn 70, you become eligible for delayed retirement credits. This can slightly boost your monthly payout. For instance, if you were born in 1943 or after, you get an 8% yearly increase in the primary insurance amount of your benefit. This results 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 collecting Social Security before your FRA and later decide to head back to work. You may want to stop benefits 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 combined 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 Social Security 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 Social Security during the years when you know you will earn a high income can result in less taxable income in that period. This 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 press pause:
You can withdraw your Social Security claim within 12 months of starting benefits.
If you aren't eligible for withdrawal but have reached your FRA and have not yet reached age 70, you can choose to suspend payments.
You can only stop Social Security if you started benefits less than 12 months after you became entitled to receive them, or you have reached your FRA but are not yet 70 years old.
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 to stop them. Here's how to do it:
To Withdraw Benefits
Complete Form SSA-521, stating the reason for the withdrawal. Send the form 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 benefits. You must contact the SSA orally or in writing if you want to restart payments before age 70. In the month you turn 70, however, your suspended benefits will be automatically reinstated.
You can only withdraw benefits once in a lifetime.
Consequences of Stopping Benefits
Before you contact the SSA, evaluate the impacts of your choice, including:
Social Security Benefit Repayment
If you withdraw your application, you must repay what you have received so far. Be aware that this also includes benefits that your spouse or children received. You will also have to repay any federal tax that was voluntarily withheld from your benefit, as well as money withheld for Medicare Part B, C, and D premiums. 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 Social Security benefits. This is not mandatory. But, if you choose to withdraw from Medicare, you will also have to repay Medicare Part A benefits.
Changes in Other Government Benefits
If you are entitled to railroad or veteran's benefits, your withdrawal may affect those payments. Check with either the Railroad Retirement Board or the Department of Veterans Affairs to find out whether stopping Social Security would have an impact on your finances.
Suspension of Others' Benefits
Most of the time, if others, such as a spouse, claim benefits based on your record, their benefits will also be suspended.
Social Security Income (SSI) Benefit Suspension
If you currently collect both Social Security and SSI benefits, suspending benefits suspends your SSI benefits.
The Bottom Line
If your benefits start date or your age permits you, you can stop your Social Security benefits. Later, you can re-apply for them or restart them to maximize payments or minimize taxes.
But 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.