Can I pay back Social Security and restart later?
If you had already retired and plan to go back to work, you're legally entitled to participate in your employer's 401(k) plan. As long as you're employed by that company, there's no cutoff age. Just be sure that it makes sense for your particular financial circumstances.
If you started collecting Social Security and then go back to work, your age and earnings determine whether your Social Security benefits are reduced.
Reconsidering benefits you've already taken
If you previously elected to receive early Social Security benefits at a reduced rate, you have the option of paying back to the government what you've already received and then restart benefits at a later date to take advantage of a higher payout.
For example, let's say you elected to receive early benefits at age 62 and you're now 65 and thinking of going back to work. You could stop receiving Social Security, pay back the three years' worth of benefits you received, go back to work, and then wait until age 70 to restart your benefit checks at a higher level. (You will receive your largest benefit by delaying retirement until age 70, so it never makes sense to wait past that age.) Paying back prior benefits is similar to buying an annuity, except that you don’t have to pay any interest on the benefits you've already received and there are no fees.
As to whether it makes sense to take advantage of this option, it depends on your tax situation, your age and life expectancy. Of course, you also have to come up with the repayment money. You might want to enlist the help of a certified public accountant (CPA) or another financial professional to help you crunch the numbers.
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Source: "Making the Most of Your Social Security Benefits", by Rande Spiegelman, March 14, 2012.
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