I’ve been saving up questions involving the payment of retroactive Social Security retirement benefits. Here they are.
Q: I will be age 70 in October. My plan was to start my retirement benefits at that time. But when I called Social Security in July, they gave me the option of taking six month’s worth of retroactive benefits starting in January. What a great deal! I’m going to get a check for about $18,000! Why don’t they advertise this? Why don’t you talk about it in your column?
A: I have talked about the retroactivity of Social Security benefits in past columns. And if you think about it, what happened with you and your Social Security isn’t that big a deal. I will explain.
Any Social Security claim filed after age 66 comes with the possibility of up to six months of retroactive benefits. So when you filed your retirement claim in July, you were offered the opportunity to claim benefits all the way back to January if you wanted them. And apparently, you did. So the good news is you get a retroactive check for $18,000. But the bad news is that you will be getting a slightly smaller monthly benefit than you would have received if you started your benefits in October.
People who delay filing for Social Security beyond their full retirement age (age 66 for most people today) get a “delayed retirement bonus” of two-thirds of one percent for each month between age 66 and age 70 that they put off filing for Social Security. That comes out to 32 percent increase if you wait until age 70 to file. You will be 70 in October. But you have now started your benefits effective with last January. So your ongoing bonus will only be about 27 percent.
And here is another way to look at this whole issue of retroactivity. If you wanted your benefits to begin in January, why didn’t you just file for them in January? You still would have gotten the 27 percent bonus added to your monthly checks.
Maybe you just like the idea of getting that big fat retroactive check for $18,000. But if you ask me, it’s like you gave a free loan to the government. You let them hang onto your money for the past six months and now they are giving it back to you without paying you any interest.
Still, an $18,000 check is pretty good. So enjoy spending it!
Q: I was 64 last March. I intended to file for my Social Security retirement benefits then, but I never got around to contacting my Social Security office because I ended up in the hospital with a pulmonary embolism. I’ve been out and recovering for the past couple months. I’m now pretty much back to full strength. I called the Social Security people last week and told them I now wanted to sign up for my Social Security and that I wanted benefits retroactive to March. The agent told me I could not do that. She said my claim would have to be effective with this month. Don’t all Social Security claims come with up to six months of retroactive benefits?
A: As I stated in the answer to the first question, retroactivity for retirement benefits is limited to claims filed after full retirement age. Because you are under age 66, your claim can only be effective with the month it is filed.
Or to put that another way, retroactive benefits can NOT be granted if it involves the payment of any reduced benefits — meaning benefits reduced for starting them before one’s full retirement age. For further clarification of this, see the next question and answer.
Q: I was 66 in May. I was planning to wait until 70 to apply for my Social Security. But for reasons I don’t need to go into, I need money now. So I went to my Social Security office to sign up for my retirement benefits. I thought I could even get six month’s worth of retroactive benefits. But the agent said I could only get paid back to May without explaining why. Can you explain?
A: I sort of did in my answers to the previous questions. You were able to claim retroactive benefits only back to the month you turned 66 — but not before. So you can get paid retroactively to May — but nothing before that. To repeat: Retroactive benefits cannot be paid prior to your full retirement age month.
Q: I called Social Security in May on my 63rd birthday to file for Social Security. I talked to a representative for a while. She was ready to take my claim, but I told her I wanted to think about it. I finally decided to go ahead with things and called in early July and filed my claim. I just got my first check, and it looks to be a lump sum check paying me back to May. I remember in a previous column you said there could be no retroactive benefits prior to age 66. So what happened to me?
A: I purposely put your question here to make an important distinction about retroactive benefits. And that distinction is this: You technically did not get retroactive benefits. When you called the Social Security people in May about filing a retirement claim, they must have entered information about you into their computer system. And that set up what they call a1 “protective filing date.” In other words, you indicated an interest in filing for Social Security benefits in May. And when you finally decided to pull the trigger and actually sign up for them in July, they were able to use that May date as your filing date.
So to repeat: You did not get retroactive benefits. You simply got benefits beginning with the first month you inquired about applying for your Social Security.
By the way, you will soon get a letter from the Social Security people explaining all of this. They almost always send out the check first — figuring you’d like your money as soon as possible. And then they get around to mailing you an “award letter” that tells you all about your Social Security benefits.
