In an ideal world, you'll have plenty of retirement income at your disposal outside of Social Security. But that's not a given.
Motley Fool research finds that in 2022, the median retirement savings balance among Americans aged 65 to 74 was just $200,000. That's not a huge sum in the context of what could be a retirement that's decades long. So, if you're a retiree with limited savings, you may end up more reliant on Social Security than expected.
Now, when it comes to claiming Social Security, you have choices. If you sit tight until full retirement age (FRA) arrives, you'll get the full monthly benefit you're entitled to based on your 35 highest-paid years in the workforce. FRA is either 66, 67, or somewhere in between, depending on your year of birth.
However, you're allowed to file for Social Security ahead of FRA -- as early as age 62, in fact. And many seniors opt to take benefits early to get their money sooner. But filing for Social Security before reaching FRA means seeing your monthly benefit reduced -- generally for life.
You might file for Social Security ahead of FRA only to realize what a whopper of a mistake that was. After all, when you're short on savings, a reduced monthly benefit could be detrimental to your ability to cover your bills.
The good news, though, is that you're not necessarily doomed to a reduced monthly benefit for the rest of your days. If you regret filing early, you may be able to undo your mistake -- if you act quickly.
When you get a second chance to claim Social Security
Often, claiming Social Security before FRA means having to live with a reduced monthly benefit for the rest of retirement. But there's a little-known rule that could spare you that fate.
All Social Security recipients are entitled to a single do-over of sorts in their lifetime. To take advantage of this option, you need to do two things:
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Undo your filing within a year of putting in your claim.
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Repay all of the benefits you've received to the Social Security Administration.
If you take these steps, you'll then have the option to sign up for Social Security at a later point in time. If you wait until FRA, it'll mean not having to face a reduced monthly benefit for the rest of your days.
However, this isn't a move you can just sit on. You only have a year to withdraw your benefits application and repay the benefits you received. It may take some work on your part to come up with the money to do the latter. So, the sooner you make the decision to undo your early filing, the better.