Social Security is a program from the government that has the intention of catering to the welfare of its citizenry through provision of basic commodities such as food, shelter and clothing. The program also facilitates provision of good health services which are of great importance, especially to the vulnerable members of the society such as children, the elderly and women.
Government has set an institution that is responsible for the payment of Social Security benefits to its citizens. In order to receive such benefits, one must have worked for years and therefore have paid Social Security taxes. Payment of Social Security taxes earns a person credit in his or her social records. An individual must work for a certain period of time in order to acquire the amount of credit that will help ensure a retirement income. Moreover, those who have worked for a long time and have saved enough will receive greater benefits.
Normally, people receive their retirement benefits at the age of 66 years. At this time, individuals are eligible to receive any available retirement benefit in full. Some people would rather receive retirement benefits earlier, such as at the age of 62, which is before they reach the age of retirement. In this case, they will only receive reduced benefits.
Social Security law allows its recipients an interest free loan once they have become eligible. People who receive these loans can invest the money in order to make more profits from the investment. These recipients would later withdraw their application after receiving the initial benefits. The Social Security Administration refers to this as a do-over strategy.
Under this strategy, those who take an early retirement invest the loan they had applied for. These recipients could also withdraw their application for early benefits and reapply for the full retirement benefit that is paid in full after a person has reached the retirement age. This is important because an early retirement benefit is reduced.
After the recipient is ready to repay the amount loaned to them, they have to do so in a single lump sum. The interest-free loan is very useful as it is used for investment. However, it favors the higher income earners in the society. This is because high income earners are capable of repaying it in one single payment.
The Social Security Administration published a new law that limits a person to only one withdrawal. They are expected to apply for withdrawal of their application within the first 12 months of receiving their first benefit. This means that once they have withdrawn, those who opt for this option have only one chance to reapply for renewed Social Security benefits.
The only disadvantage for this option is that it denies the Security Trust Fund the use of money that is borrowed by the beneficiary who has the intention of withdrawing the application later on.
The Social Security do-over strategy provides an easy way out and an easy way in for those who wish to take an early retirement, withhold their application from early benefits and later on apply for old age retirement benefit which are paid in full. Early retirement benefits are reduced compared to those who apply after they have reached their retirement age. But with the new regulation for a single reapplication, it is now not possible to apply for an early retirement more than once.