You Can Have your Social Security Benefits and Defer them too.

Seldom in life is it possible to change your mind about a major financial decision. But Social Security retirement benefits, which come as a lifetime annuity widely regarded as better and safer than one from any insurance company, are different.

Under a longstanding but little-known part of the law, retirees who decide to start collecting benefits are permitted to change their minds and start over, reaping the progressively higher payments brought by deferral until age 70.

In other words, you can start collecting at 62, saving and investing that money, and then at age 70 file a withdrawal application and still get the maximum benefits accorded to those who wait to start collecting. All you have to do is repay what you’ve collected so far (plus any money withheld for Medicare premiums). You can even deduct the repayment or take an income tax credit for taxes you paid on benefits.

“We’re seeing it more often,” said Mark Lassiter, a Social Security spokesman. “What is new is the use of it as a financial strategy, but it’s still not anything I would consider commonplace.” He said the agency did not try to discourage the tactic and was interested only in making sure applicants fully understood what they were
doing.

A major risk is that a retiree could die after repaying many tens of thousands of dollars. “I’ve heard of cases of people paying $100,000 or more back to do this,” said Mr. Lassiter. “The risk that they are taking, of course, is that they walk out the door on the way back home and get hit by a bus.”

But many financial planners contend that the risk of premature death is less than that of living longer than actuarial tables might suggest, only to run out of money.