It involves a little strategy, but you might manage to pull it off.
You may reach a point where you need a lump sum of money, whether to fix up your car, deal with a home repair, or address another need. At that point, you have options. You could talk to lenders about tapping your home equity or turning to a loan that's unsecured. But you may want to consider borrowing the money from Social Security if you're old enough to take benefits.
How to take out an unofficial loan from Social Security
Social Security will not give you a loan or let you borrow against your future benefits. You can't, for example, ask to borrow $5,000 and then simply have Social Security deduct that sum from your benefits once you start collecting them.
What you can do, however, is file for Social Security early and then undo your claim after the fact. This strategy might allow you to effectively borrow money from Social Security, but it's not without risk.
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You're entitled to your full monthly Social Security benefit based on your earnings history once you reach full retirement age (FRA). That age is 67 if you were born in 1960 or later.
Meanwhile, you're allowed to sign up for Social Security once you turn 62. But for each month you claim Social Security ahead of FRA, your monthly benefit is permanently reduced.
There's an exception to that rule, however, and it's if you manage to undo your Social Security filing within a year of taking benefits. In that case, if you withdraw your application for Social Security and also repay all of the benefits you received within 12 months, you'll get a do-over and will be able to file for Social Security again at a later age. In doing so, you can avoid a permanent hit to your monthly benefit, all the while getting access to the money you need.
Here's how this tactic might work. Let's say you're 62 years old with an FRA of 67, you're still working, and you need a few thousand dollars but don't want to take out a loan.
In that case, you can file for benefits, take your money and use it to address whatever your need for cash entails, and then spend the next bunch of months banking your paychecks. You could then withdraw your benefits application within a year of your filing, repay the Social Security Administration what it paid you, sit back, and claim benefits at age 67, thereby avoiding a lifelong reduction.
A risky move, but an option nonetheless
The danger in claiming Social Security early and planning to undo your filing is that you might end in a situation where you can't repay the money you borrowed. That could lead to a permanent reduction in your monthly benefits -- something that might seriously upend your retirement.
But if you're confident you'll be able to repay the benefits you've received, then this strategy could work to address a near-term need for money. And that way, you can avoid racking up interest on a loan. At a time like this when borrowing rates are up across the board, that's not such a bad thing.
FAQs
Key Points. Social Security does not allow recipients to borrow against their future benefits. There may be a way to get access to your money sooner without having to lock yourself into a lower monthly benefit for life.
Can you pull money from your Social Security? ›
You are limited to one withdrawal per lifetime. If you cannot withdraw your application and you have reached full retirement age but are not yet 70, you can ask us to suspend benefit payments.
What is a strange but true free loan from Social Security? ›
The brief's key findings are: An unconventional strategy allows individuals to use early Social Security benefits like a “free loan,” paying back the principal while keeping the interest. If this strategy were widely adopted, it would cost Social Security $6 billion to $11 billion per year today and more in the future.
How much money can you have in the bank on Social Security retirement? ›
To get SSI, your countable resources must not be worth more than $2,000 for an individual or $3,000 for a couple. We call this the resource limit.
What is the Social Security 5 year rule? ›
Depending on your income, you can earn up to four credits a year. In 2024, workers earn one Social Security and Medicare credit for $1,730 in covered earnings. Under the five-year rule, people 31 and older must have worked at least five out of the last 10 years to be eligible for SSDI.
Can I borrow money from my Social Security? ›
Social Security will not give you a loan or let you borrow against your future benefits. You can't, for example, ask to borrow $5,000 and then simply have Social Security deduct that sum from your benefits once you start collecting them.
Can I access money from my Social Security card? ›
Your monthly benefits will be available on your payment day—on time, every time. You can use the card to make purchases, pay bills or get cash at thousands of locations. It's quick and easy to sign up for the card. Call the toll-free Direct Express® hotline at 1-800-333-1795.
What is a social loan? ›
An introduction to social loans, a form of loan designed to finance activities and projects that address a social issue or achieve a positive social outcome for certain communities.
What is the $16 122 Social Security bonus? ›
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
Can I use my Social Security check as collateral for a loan? ›
Lenders need to know you can pay back your loan, and some lenders have different minimum income requirements. Monthly bank statements, pay stubs and recent tax returns are ways to show how much your income is. Assets that can help retirees qualify for a loan include: Social Security check.
SSDI payments are not affected by having a house, a car, money in the bank, or owning other possessions. On the other hand, many SSI clients are surprised to learn that assets do affect their benefits. Social Security will take into consideration the amount of your assets, because it is a needs-based program.
Can I get a tax refund if my only income is Social Security? ›
You would not be required to file a tax return. But you might want to file a return, because even though you are not required to pay taxes on your Social Security, you may be able to get a refund of any money withheld from your paycheck for taxes.
At what age is Social Security no longer taxed? ›
Social Security tax FAQs
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
When my husband dies, do I get his Social Security and mine? ›
In many cases, a surviving spouse can begin receiving 1 benefit at a reduced rate and allow the other benefit amount to increase. If you will also receive a pension based on work not covered by Social Security, such as government or foreign work, your Social Security benefits as a survivor may be affected.
Does a wife get half of her husband's Social Security? ›
The spousal benefit can be as much as half of the worker's "primary insurance amount," depending on the spouse's age at retirement. If the spouse begins receiving benefits before "normal (or full) retirement age," the spouse will receive a reduced benefit.
Do married couples get two Social Security checks? ›
If you are married and you and your spouse have worked and earned enough credits individually, you will each get your own Social Security benefit.
Can I access my Social Security money? ›
There are two ways you can receive your benefits: Into an existing bank account via Direct Deposit or. Onto a Direct Express® Debit Mastercard®
Can you access your Social Security money early? ›
You can receive Social Security retirement benefits as early as age 62. However, we'll reduce your benefit if you start receiving benefits before your full retirement age. For example, if you turn age 62 in 2024, your benefit would be about 30% lower than it would be at your full retirement age of 67.
Can I withdraw my Social Security in a lump sum? ›
When you wait until full retirement age or later to claim Social Security retirement benefits, you have an option. You can receive a lump sum payment of up to six months of retirement benefits.
Can you spend your Social Security money? ›
As a payee, all payments received from the Social Security Administration (SSA) must be used for the individual's current maintenance needs or saved for future needs. Current needs include: Food. Housing.
