Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

October 7, 2012
Did Social Security pull the rug out from some early retirees?

Q: My brother applied for Social Security retirement benefits early and started receiving benefits in February 2009 (at age 65). His decision was based on his cash flow at the time and the understanding that he could rescind his application and re-apply for benefits at age 70 (paying back all the retirement benefits he'd been paid to that point), thereby maximizing his monthly benefit check (he expects to live forever).

Recently he checked the Social Security website and discovered that a change in 2010 limits the time in which to rescind an application for benefits to 12 months from the date of the first benefit payment.

He feels screwed. He made his decision to start drawing Social Security benefits based on the fact that he could rescind his application and re-apply at age 70. Had he known that he would be prevented from doing that, he wouldn't have started taking the benefits in the first place. He believes that a notice of the change should have been sent to all those under the age of 70 who were currently receiving Social Security retirement benefits. That would have enabled anyone who wanted to to rescind his or her application.

Since both my brother (and thousands of others, no doubt) acted in good faith based upon an existing regulation, he feels that those in his situation should be "grandfathered in" (ie. sent a notice and allowed to rescind their original application within a reasonable period of time). Is this being considered? Is it likely to happen?
-- Larry, Elk Grove

A: In early December 2010, the Social Security Administration (SSA) announced that it was tightening the rules of a program that allowed retirees, who had elected to take benefits early, to repay all the amounts received without owing any interest, and then reapply for the higher benefits awarded to those who wait until they are older to cash in.

The SSA said it was acting because of concerns the do-over provision could be manipulated for financial gain, and was being promoted by the media as a way for retirees to boost benefits or get an "interest-free loan" from the government.

The new rule limits the time period during which retirees can withdraw an application to within 12 months of the first month of entitlement. It also permits only one application withdrawal per lifetime.

The SSA received numerous complaints from retirees who felt that the rule change was unfair to those who, in good faith, had taken advantage of the rules that were in place when they elected to take early retirement.

In January 2011, the AARP petitioned the SSA to at least give those who were already receiving benefits a full 12 months, until December 8, 2011, to withdraw their Social Security applications, and pay back their benefits without interest.

The SSA did not respond favorably to the above requests.

Given the precarious financial state of the Social Security system, it is highly unlikely that your brother, or anyone else who was adversely impacted by the rule change, will receive any relief.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.

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