If you decided to wait until full retirement age to begin collecting Social Security, you can request retroactive payments that are typically delivered via a one-time, lump-sum payment when you file for your retirement benefits. This might not be the best strategy, however.
The maximum that the Social Security Administration offers is six months’ worth of retroactive payments in the lump-sum payment. By taking the so-called “delayed retirement credit,” your retirement date and the amount of your monthly benefit are rolled back six months, according to Aubrey Carew Sizer, principal attorney at The Law Office of Aubrey Carew Sizer PLLC, a Northern Virginia law firm.
To request a delayed retirement credit, just let the SSA know when you sign up for retirement benefits. In some cases, the SSA might even offer the lump-sum payment when you file for your retirement benefits, according to the Social Security Intelligence website.
On its own website, the SSA said it cannot pay retroactive benefits for any month before you reached full retirement age, or for more than six months in the past. If you retire before age 70, some of your delayed retirement credits will not be applied until the January after you start receiving benefits. The full retirement age is 66 for those born between 1943 and 1954. After that, you add two months for every year up to 1960, when the full retirement age becomes 67.
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If you reach your full retirement age in June, for example, you might decide to wait until your 69th birthday to start your retirement benefits. In this case, your initial benefit amount will reflect delayed retirement credits earned from your full retirement age through the year before your 69th birthday. In January of the following calendar year, your benefit will increase for the credits earned in the year of your 69th birthday.
The SSA’s Online Calculator can provide an estimate with all credits applied for comparison purposes.
If you do take the lump-sum payment, you will lose the delayed credits that you had accumulated over the previous six months, Sizer wrote on her website. This means your monthly benefit will be lower than if you didn’t take the lump sum — and that lower benefit will last for as long as you collect Social Security.
As Sizer noted, your decision on whether to take the lump-sum payment depends on factors such as your life expectancy, your spouse’s needs and what you will do with the new money.
Taking the payment makes more sense if your life expectancy is shorter. But if you’re married and are the higher earner, you will need to consider your spouse’s needs. If you die and your spouse has a longer life expectancy, it’s better to forego the lump-sum payment so they will receive a higher monthly benefit.
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This article originally appeared on GOBankingRates.com: Social Security: How To Request Retroactive Payments If You Started Collecting After Your Full Retirement Age