I interviewed Pam Villareal from the National Center for Policy Analysis (www.ncpa.org) about a recent white paper that they put together. It was about Social Security and the little known loophole. The basis of this loophole is that someone can start taking their Social Security payments at age 62 for the reduced amount. Then at age 70, they can reapply for the higher amount.
The couple would have to pay back the benefits that have been paid to them for those eight years. It is basically getting an interest-free loan. In the article, they give an example of a couple that is taking out a benefit at age 62 that totals $13,250 each. However, if they had waited until age 70, they could take out $20,693 a year. That is a pretty big jump.
So they take out the benefit at age 62 for the next eight years. Then they pay back that benefit and then get a $7,000 raise. If you didn’t need that benefit, you could have taken the money and put it in an interest bearing account, made money off of essentially an interest-free loan from the Government, and then started collecting a much higher benefit at age 70.
Keep in mind, there are a lot of assumptions being made and this isn’t for everyone. However, it might be a good deal if the assumptions fit.
For more information, go read Double-Dipping Social Security.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
