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
Social Security does not allow recipients to borrow against their future benefits.
What is the $5000 loan from Social Security? ›
These loans allow eligible individuals to borrow against their future Social Security benefits, providing a lifeline during times of need. Among the various Social Security loan options, the $5,000 loan stands out as a valuable resource for those in immediate need of funds.
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.
Has money ever been borrowed from Social Security? ›
Since 1983, every US President has borrowed from Social Security to pay for government expenditures.
Can you borrow money from your Social Security? ›
Can You Borrow from Social Security? Not anymore. A provision that was discontinued in 2010 allowed you to collect benefits at 62, then repay the loan at 70 and re-file for the higher benefits you receive at that age.
Does Social Security give cash advances? ›
Emergency advance payments. (a) General. We may pay a one-time emergency advance payment to an individual initially applying for benefits who is presumptively eligible for SSI benefits and who has a financial emergency.
Can you pull money from your Social Security? ›
You can withdraw an application for Social Security retirement benefits within 12 months of getting approval, but you'll have to return any money you've received. If you've reached full retirement age but are younger than 70, you may also be able to pause your payments.
Is there really a social security trust fund? ›
The Social Security trust funds are financial accounts in the U.S. Treasury. There are two separate Social Security trust funds, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund pays disability benefits.
Can I collect my Social Security money? ›
You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.
How much does the US government owe to the Social Security Trust Fund? ›
As of December 2022 (estimated), the intragovernmental debt was $6.18 trillion of the $31.4 trillion national debt. Of this $6.18 trillion, $2.7 trillion is an obligation to the Social Security Administration.
While every lender is different, you might expect to be prepared with the following information: Social Security number (SSN) to identify you as a U.S. citizen and establish who you are. Your SSN might also be used to pull your credit history and score to evaluate you for loan approval and determine your interest rate.
What is an emergency advance payment from SSI? ›
WHO CAN RECEIVE AN EMERGENCY ADVANCE PAYMENT? Are due SSI benefits (including PD or PB payments) that are delayed or not received. Are facing a "financial emergency", which means they need money right away due to a threat to health or safety, such as not enough money for food, clothing, shelter, or medical care.
How do I get the $16728 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.
How to qualify for a $5,000 loan? ›
Requirements for a $5,000 Personal Loan
Some lenders may have a strict minimum credit score requirement, while others may be willing to approve you with a lower credit score. You will also need to have a source of income and a history of paying bills and past debts on time.
How much would a $5,000 dollar loan cost? ›
What is the monthly payment on a $5,000 personal loan? The monthly payment on a $5,000 loan ranges from $68 to $502, depending on the APR and how long the loan lasts. For example, if you take out a $5,000 loan for one year with an APR of 36%, your monthly payment will be $502.
