Thursday, February 10, 2011

Retirees upset about Social Security rule change

The New York Times Bucks blog discusses the Social Security Administration's recent decision to shut off the "Social Security restart" scheme, which lets retirees repay what they've received from Social Security – without interest – and then receive a higher monthly benefit.

Sure, some of those individuals may have been gaming the system  —  perhaps even investing the money only to repay it later, all on Social Security's dime. But other individuals took benefits early because they had lost their job, for instance, and used the benefits to tide them over until they found work.

The Times then quotes a number of people who had been planning to restart, but now saw their options limited by the ruling.

It's worth pointing out that SSA still does allow individuals to restart their benefits, but they can do it only once and the restart must happen within 12 months of their original claim. Given the clear opportunity to game the system – which means, in effect, gaming the taxpayer – this seems like a reasonable compromise. Even if the restart were closed down completely, individuals could replicate it on their by using an amount equal to what the benefits they had previously received to purchase an annuity, or simply put it in the bank and draw it down a little at a time. It's not a perfect match, but it means they can more or less accomplish their goals without leaving an opportunity for financially literate retirees to game the system.

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