A few months ago, I briefly discussed the possibility of retroactive Social Security retirement benefits. But if my email inbox is any indication, I guess I raised more questions than I answered. So today I will tackle the topic in more detail. Although the general rules are fairly simple, it can get a little complicated when you get down to the nitty-gritty of things.
In a nutshell, the rules say this: You can collect up to six months’ worth of benefits retroactively, but those benefits can’t include any reduced retirement payments. Or, to put that another way, you can’t get any retroactive benefits if you are under your full retirement age. Here are a few quick examples to help explain the rules.
- Ann is 68 years old when she finally decides to sign up for her Social Security. She can elect up to six months’ worth of retroactive benefits.
- Frank is 66 years and 6 months old. His full retirement age is 66 years and 2 months. He can choose to collect up to four months’ worth of retroactive benefits. (He can’t be paid any retroactive benefits before his full retirement age.)
- Allison is 64 years old when she applies for Social Security. She can’t get any retroactive benefits because she is under full retirement age.
So, the rules seem pretty straightforward. There are no retroactive benefits payable if you are under your full retirement age. But alas, it’s not quite that simple. And to illustrate why, let’s use another example.
On Oct. 10, 2019, Henry, 63, called the Social Security Administration 800 number to discuss the possibility of filing for Social Security retirement benefits. After talking to the SSA agent, Henry learned he was eligible for benefits. But he said he wanted to think things over. On Dec. 3, 2019, after getting a follow-up letter from the SSA, Henry called back and said he was ready to file. Henry was given the option of starting his benefits in December, or he could select October as his starting date.
Some readers might wonder why Henry could get two months’ worth of retroactive benefits if the rules say no such payments can be made if you are under full retirement age. The answer is because those two months are technically not retroactive payments. When Henry called the SSA in October, the system set up what is known as a “protective filing date.” So, when Henry actually filed his claim in December, they were able to use October as his starting date. Henry thinks he got two months’ worth of retroactive benefits. But he really didn’t. His payments simply began with the date of his protected October phone call to the SSA.
This protective filing stuff can get a little messy, and I’m not going to delve too deeply into the mechanics of the process. But I will make one more point because it does get into today’s discussion of retroactivity. If you contact the SSA and the agency establishes a protective filing date for you, you generally have 60 days to either file a claim or let the SSA know you don’t want to do so. And the SSA is supposed to send you a letter prior to the expiration of that 60-day time frame to let you know the clock is ticking. But if they fail to do so, that protected date remains open.
To illustrate, let’s go back to Henry, who contacted the SSA on Oct. 10, 2019 about filing for Social Security but decided to wait to think about it. And this time, let’s say the SSA never sent him the follow-up letter. Finally, eight months later, in June 2020, Henry contacts the SSA again and says he is ready to file. He would have the option of being paid all the way back to October 2019. But again, legally, these would not be eight months’ worth of retroactive benefits. It would simply be as if he filed his claim in October 2019.
All of the above explanations and discussion was just to establish the general rules about the payment of retroactive benefits. But by far the most common questions I got about the topic came from folks who are well over their full retirement age who wanted to claim retroactive benefits. Here is a typical question:
I just turned 69. I am planning to wait until 70 to start my Social Security. I just learned that I can take six months of retroactive benefits when I turn 70. Can I really do that? And how will that affect my ongoing benefits?
A: Well, I will start out with the easy answers. Yes, you can claim six months of retroactive benefits (because you are over your full retirement age). And your ongoing retirement benefit will be 4% less.
I will explain where the 4% comes from. You get an extra two-thirds of 1% added to your full retirement rate for each month you delay starting your Social Security checks after age 66. That comes out to a 32% increase if you wait until age 70. (There are no increases after you turn 70.) So if you file for your retirement benefits at 70 and claim six months retroactively, you will give up the two-thirds of 1% increase for those six months. That comes out to 4% less.
You are one of maybe 100 people who asked me a similar question. But here is what I can’t figure out about your plans: Why wait until age 70 and then claim the six months’ worth of retroactive benefits? Why not simply start your Social Security checks when you are 69 and six months? You will end up with the very same amount of money. You will just get it in monthly installments as opposed to getting the one big retroactive check.
The way I see it, if you wait until 70 and then claim the six-month retroactive check, it’s like you loaned the government all that money for six months and then they pay you back once you reach age 70, without interest. So why wait? Maybe some people just like the idea of getting a big check from the government? Maybe some people do it for tax reasons? Who knows?
One final note: In today’s column, I dealt with the subject of retroactivity for people getting retirement benefits. Things are very different, and potentially way more complicated, when it comes to disability benefits. And that’s a subject for another column someday.
