The Social Security Administration recently announced that retirees would get no cost-of-living adjustments this year — and maybe not even next year — because the inflation measure it uses to determine them has declined for the first time in more than three decades.
Congress and the administration are working on legislation to provide seniors a $250 consolation prize, a one-time check that would amount to about 2% of the average senior’s benefits. But retirees may be able to do far better than that by taking advantage of a loophole in the Social Security law. Using this loophole, which allows you to “restart” your retirement benefits years after you’ve retired, can be risky. But if you’re healthy, have some savings and are under age 70, it may well pay off in spades.
Someone who originally retired at age 62 and “re-retires” at 70, for example, would boost monthly benefit payments by 76%, said Brett Horowitz, a certified financial planner with Evensky & Katz in Coral Gables, Fla.
The catch? You have to repay what Social Security has given you so far.
Sound crazy? It would be if you’re in poor health. That’s because Social Security payments die with you. Unless you live past age 82, you are likely to have repaid more than you got back in monthly income, said Larry Kotlikoff, an economics professor at Boston University.
Moreover, if you don’t have more than enough in savings to repay the benefits in a lump sum plus some money left over to cover emergencies, you shouldn’t do it, Horowitz said. That’s because you can’t go back. Re-retiring is like buying a lifetime annuity with your savings. Once purchased, you can’t get your principal back. You bought yourself a stream of monthly payments. You don’t have …
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