Social Security Retroactive Benefits

[Independent]

I learned something while visiting with a SS rep. This may be old news around here, but I don't recall seeing it before.

I filed and suspended at age 66, intending to defer to 70. Since then, some things have changed and I've been considering starting sooner.

The rep told me I could start any time by simply calling the office (since I'm already on record as filing). Furthermore, I could pick my start date, all the way back to my NRA, if I want. If I did that, they would "reinstate" my benefit, and give me a lump sum check for the missed payments. Of course the benefits would not include the deferred retirement credits past the date of reinstatement, and there is no interest adjustment.

Since I was on the fence, that little bit of do-over potential pushed me to continue deferring.

This could be relevant for the typical "when to start" debate. One of the frustrating issues with deferring is the possibility that your health deteriorates and you wish you had started sooner. It seems that if you defer than get bad news in the narrow band of NRA to age 70, you could almost put yourself back into the start-at-NRA world.

I looked for some thing on the SSA.gov site to verify the rep's explanation. This is the closest I could get:

If you change your mind and want the payments to start before age 70, just tell us when you want your benefits reinstated (orally or in writing). Your request may include benefits for any months when your payments were suspended.

https://www.socialsecurity.gov/planners/retire/suspend.html

I found a magazine article that's clearer:

A more flexible approach is to tell the agency that you want to “file and suspend” your benefits. This way, your benefits will still rise each month until you begin taking them. But it creates a nice insurance policy for you. At any time after turning 66 and before your benefits begin automatically at 70, you can ask Social Security to issue you a lump-sum payment for all the benefits you would have received had you begun taking them at age 66.

Without the file-and-suspend in place, if you had an emergency that required you to start benefits, you could not get all the foregone payments reinstated. The best you could do is file retroactively and get a maximum of six months benefits.

How to Get Social Security In a Lump Sum (Without Taking Any Lumps) - TIME

 

[Rosie]

The TIME article is dated June 2014. Changes have been very recently made in SS which make (or are about to make) certain claiming strategies obsolete, or at least minimize their applicability. I don't have the links handy but I believe it's been discussed some in this forum.

 

[travelover]

If you did get a lump sum, would it all be taxable in a single year?


Sent from my iPad using Early Retirement Forum

 

[mathjak107]

you can still file and suspend but while suspended no one else can collect a benefit off your record unless you were grandfathered in. but as far as i know you can still lay lump sum claim to your own benefit .

yes the lump sum is all taxable in the year you get it .

we are grandfathered so our plan has my wife suspending her early benefit she has been getting since 62 at her fra next august .,

by doing that she will have the right to claim any money lump sum going back to fra if we change our plan and her benefit will be 32% plus cola's larger when she resumes at 70 if we stick to the plan . .

i will be 68 when she hits 70 so i will file restricted application for 1/2 her 70 benefit and then take mine when i am 70 .

this plan came about last week when we met with our team at fidelity and used their new in house tool the social security optimizer .

 

[sanfanciscotreat]

If you did get a lump sum, would it all be taxable in a single year?


Sent from my iPad using Early Retirement Forum

As I understand, up to 85% is SS benefits are taxable depending upon the amount of other income.

 

[mathjak107]

yep , only up to 85% of it

 

[rothlev]

You can do some calculations if you receive benefits from a prior year. This allows you to compute the tax as if you had claimed the benefits in the prior year. I do this in the tax office, and there are worksheets for doing it manually and an input line for using the optional method on the social security input screen.

 

[rothlev]

It won't change anything if your income in the prior year makes 85% of the benefit taxable in that year also.

 

[Free To Canoe]

If you did get a lump sum, would it all be taxable in a single year?


Sent from my iPad using Early Retirement Forum

You can optimize when to claim the lump sum for tax purposes. If you can claim some or all in past years if it is to your benefit.

 

[Independent]

You can do some calculations if you receive benefits from a prior year. This allows you to compute the tax as if you had claimed the benefits in the prior year. I do this in the tax office, and there are worksheets for doing it manually and an input line for using the optional method on the social security input screen.

I didn't know this, either.

I think you're referring to Worksheets 2 and 4 in Publication 915.
https://www.irs.gov/publications/p915/ar02.html#en_US_2014_publink1000263043