Social Security Can Provide Temporary Income
The arrival of the coronavirus has resulted in job losses—from temporary furloughs to permanent layoffs— for millions of Americans. With no end government relief measures coming to an end, many people are scrambling for ways to make ends meet until the pandemic ends and the employment landscape improves. Until then, individuals who have already reached the age of 62 may want to consider using Social Security as a means of temporary financial relief.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided unemployed individuals with an additional $600 per week scheduled to end on July 31, 2020. Even if Congress comes up with some form of extended financial support for people who lost jobs due to the coronavirus, such support cannot go on forever. If you are at least 62 years old and are among the millions of people who have been laid off or furloughed due to the pandemic, you still have the ability to begin collecting Social Security –even if you plan to return to work. There is, of course, a trade-off for doing so.
Though collecting Social Security after age 62, and before your full retirement age (either 66 or 67 years old, depending on the year that you were born), means a permanent reduction in the amount that you will receive, there is a loophole that basically allows you to take up to a one-year loan against your Social Security benefits. This can be done by applying for Social Security benefits early, but then canceling your application within 12 months. This is what the Social Security Administration (SSA) calls a “withdrawal.” As long as you can repay any monies you receive from Social Security within that period, the overall amount you will ultimately be eligible for when you begin to permanently receive Social Security benefits will continue to grow the same way that it would have if you had never applied for early benefits. Withdrawing from Social Security, however, is something that can only be done once in your lifetime.
After the initial 12-month period, you still have the option to suspend your benefits up until the point when you turn age 70, but only if you have already reached your full retirement age (age 66 or 67). This will again allow the ultimate monthly amount you will receive in benefits to increase by up to 8% every year up to age 70. Once you hit age 70, the amount you will receive in benefits stops increasing, so there is no point in putting off claiming Social Security after that age.
While early Social Security benefits may not be an ideal solution, it may be a way to buy yourself a bit of time to come up with an alternate solution to cover current lost income.