You intended to delay Social Security benefits until age 70, but at 68 you need the money and apply for benefits. Surprise: The Social Security Administration offers you a lump sum payment that's worth six months of benefits. Sounds nice, but accepting the money has consequences.
Here's how the offer works. If you delay applying for your benefit until after your full retirement age (66 for those applying now), you earn delayed retirement credits of 8% a year. When you finally apply, you can accept a monthly benefit that includes all the delayed credits. Or you can accept a lump sum worth six months of retroactive benefits—but your monthly benefit will shrink to the amount you would have received if you had applied six months earlier. "You are giving up delayed retirement credits," says Marc Kiner, co-founder of Premier Social Security Consulting, in Sharonville, Ohio.
Say you would have received $2,320 a month at 68. You opt for a lump sum worth six months of benefits. Your monthly lifetime benefit will be worth what you would have received at age 67 and 6 months, or $2,240. Your lump sum will be $13,440—six months of that $2,240 benefit. If you apply at age 66 and three months, the lump sum will be worth three months ....[mod edit]
