What if You Could “Turn Back Time”?

This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article discussing the fact that beneficiaries who postpone claiming Social Security past full retirement age have the option of receiving a lump-sum payment for up to six months of benefits when they finally apply:

Receiving retroactive benefits in a lump sum might be helpful if you face a change in health or need cash in an emergency.

However, you’ll want to think through the consequences, because taking an initial lump sum will reduce your monthly Social Security retirement benefit for the rest of your life.

For example, let’s say your full retirement age is 67, and your full retirement benefit would be $2,400. You decide to wait to apply for Social Security. By waiting past full retirement age, you earn delayed retirement credits that will increase your benefit by 8% per year, up to age 70. You apply for retirement benefits at age 67 and 6 months. Your benefit is now $2,496, due to the delayed retirement credits you’ve earned, 4% higher than at age 67.

If you opt to take benefits retroactively in a lump sum, your official Social Security start date and the amount of your monthly benefit will be rolled back by six months, and you will lose six months of delayed retirement credits. Your lump-sum benefit will be based on your age 67 benefit, so you will receive $14,400 ($2,400 x 6) — a sizeable amount. The downside is that…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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