Paying back, in a lump sum, the prior years’ social security income in order to benefit from higher future monthly social security checks (for life) is analogous to buying an annuity from the U.S. government. A fixed investment, today, purchases an additional income stream that will last for the rest of your lifetime. That is, after all, what an annuity is – although typically annuities are backed by an insurance company while the “Do Over” social security strategy is backed by the full faith and credit of the U.S. government.
As Barbara Traylor Smith recently reported in her "Money Matters" KREX TV segment, for many people the return from the Social Security “Do Over” is more attractive than what is available from an insurance annuity, and certainly higher than banks are paying Certificate of Deposit holders these days. For retirees who may be seeing bank C.D.’s mature and are wondering how to invest the cash, it makes sense to consider this strategy.
Recently, however, Kiplinger’s Magazine reported that the Social Security Administration is considering changing the rules so that any “Do Over” election would have to be made within a year of the original decision to begin collecting benefits. So if it makes sense, then it probably makes sense to hurry. Use the Social Security calculator to estimate the impact of adopting a “Do Over” strategy to your own situation.
Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies .
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