Q I have heard that a person may retire at 62 and draw a reduced Social Security benefit. At normal retirement, the person can repay the amount received since age 62 and apply for full benefits without having to pay interest. In addition, because the government is reimbursed for all benefit payments, a person is allowed to claim taxes that were paid on that money. Is this accurate?
DAVE, SAUK RAPIDS
A Yes. If you retire early and take a reduced monthly benefit, you can change your mind, reapply, and get the bigger payments that go to those who wait to collect benefits.
Whether or not that's a smart move depends on how the numbers work out for you and your estate-planning circumstances. But the financial maneuver is worth examining for aging retirees who took a reduced benefit. There is a catch to the Social Security two-step, however. You must send the government a check covering the benefits you've been paid (but no interest or adjusting for inflation is due).
The best insight into the process I've seen is by Laurence J. Kotlikoff, economics professor at Boston University and head of financial-planning software company ESPlanner. (Anyone contemplating the move should check out an article he wrote at www.esplanner.com/Case%20Studies/double_dip/double_dip.htm.)
Chris Farrell is economics editor for American Public Media's weekly "Marketplace Money" program on public radio. He lives in St. Paul. Send questions to: cfarrell@mpr.org, or to kaching@startribune.com, and put "Your Money" in the subject line.
