Yes, You Really Can Collect Free Money From Social Security
By Dr. Steve Sjuggerud
October 18, 2008
This week's piece on Social Security generated a lot of buzz...
Friends, family members, and subscribers have all asked this week, "Steve... this sounds ridiculous... Don't you know there's no such thing as a free lunch?"
I've been doing this a very long time. And I can tell you... it's extraordinarily rare to find "free money" when it comes to stocks, bonds, or government programs. It's almost impossible to find a "free lunch."
But without a doubt... this opportunity is the real deal. It's 100% legal. It's 100% legitimate. It makes sense for a lot of people. And it's as simple as it gets when it comes to collecting money from the government.
Thursday night, I ran into my neighbor at a restaurant. "I called Social Security about that thing in DailyWealth this week," he told me. He's 65 years old, and he started getting Social Security at 62.
"The girl on the line said she's swamped with calls. But she knew what she was talking about. I found out what I needed to do, and what I need to send in. I think I'm going to do it."
Here are the details...
You can begin collecting Social Security when you're 62 years old. But if you begin collecting when you're 62, you get less money per month than if you wait to collect until you're 65 or 70.
But thanks to the opportunity my colleague discussed on Tuesday, you can start collecting Social Security benefits when you're first eligible at 62... then restart your payments at a higher rate as you get older. It's kind of like a "do-over" strategy. You get the best of both worlds: You collect money as soon as possible... And later, your payments can get bigger.
Let's say you're a 70-year-old retiree. You started collecting Social Security benefits when you were 62, at the earliest age possible. Every month, the government sends you a check for about $1,100.
But if you had waited until the age of 70 to start collecting benefits, you'd be eligible for a monthly Social Security check of $1,720. That's 56% more money – every single month for the rest of your life.
Here's the big thing to keep in mind though... To get that increase, you have to withdraw your application to collect benefits, repay all the money the government has sent you so far, and reapply for benefits from scratch.
Now, if you have to just give all that money back, is this option even worth it?
Yes! My dad has looked into it, and he's probably going to do it, too. As my dad explained, "Doing this is like giving yourself a 7%-8% annuity, that grows with inflation."
Here's what I really love about this loophole: You pay the money back interest free. That's where the free money comes in...
Let's say you begin collecting Social Security at age 62, and you are eligible to receive $1,000 per month. You could take that money and simply put it into super-safe government bonds earning you 4% a year.
If you do this for five years, you will have accumulated $66,179, including compounding interest. Then, after five years, you cash out your holdings... return what you've collected to Social Security without interest ($60,000), pocket the $6,179, and begin collecting Social Security at a higher rate.
If that kind of free money sounds right for you, I suggest you don't wait. As my neighbor told me, the phones are busy with people asking about this. If I were in charge of Social Security, I'd close this loophole up.
So be smart like my neighbor and my Dad, and see if the math works out for you, too... Then take advantage of it while it's still open!
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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