Situational Social Security: Retroactive Benefits

We emphasize SITUATIONAL SOCIAL SECURITY in the NSSA® Certificate program, as all of your clients are UNIQUE. Your clients may be single, married with wide age differences, married with narrow age differences, divorced, surviving spouses, eligible to file a Restricted Application, public employees, etc. Advisors, (YOU), must understand the issues and questions that related to every unique client. You are your clients’ trusted advisor and must understand Social Security. Advisors attending the National Social Security Advisor Certificate program change their mindset and become PROACTIVE. NSSA® Advisors do not wait for clients to bring up the topic Social Security. NSSA® Advisors are confident in their knowledge, and actually BEGIN THE DISCUSSION. Which type of advisor are you? Hesitant to discuss SS? Confident in your understanding of SS? Proactive?

In this installment of Situational Social Security, we will discuss a very powerful SS strategy that is available to married couples when the spouses are over Full Retirement Age and have not begun their retirement benefits.  I have discussed this strategy with advisors and clients several times this week.

Retroactive Benefits – Clients beginning Social Security benefits after reaching Full Retirement Age can apply for six months of retroactive benefits.  Your client, Samantha is eligible for Social Security benefits of $2,000 per month at age 68. Her PIA is $1,724.  As a matter of fact, today, (November 21, 2020) is Samantha’s birthday!  Samantha is thinking about beginning her benefits this month, November, 2020.  Samantha’s husband, Robert, also turns age 68 today.  What a coincidence!  Robert’s Social Security benefit at age 68 is $2,500.  Robert’s PIA is $2,155.  Neither Samantha nor Robert have filed for benefits.

Clients beyond FRA may elect six months of retroactive benefits.  Six months of retroactive benefits are available upon reaching FRA.  However, the six-month period cannot precede Full Retirement Age.  Thus, an individual, age 68 can elect six months of retroactive benefits.  An individual age 66 and 3 months can only receive three months of retroactive benefits.  Retroactive benefits are paid in a lump sum.

Consider the following strategy for Samantha and Robert:

• Samantha files for benefits effective six months ago, May, 2020. Samantha receives a lump sum payment of $11,304! ($1,884 (SSB with 14 months of DRCs) * 6). Her benefit will increase to $1,930 effective 1/2021 to include the DRCs earned in 2020.
• Robert is eligible to file a Restricted Application and receive a spousal benefit of $862 ($1,724*.5).  Robert was born November 21, 1952.   Robert files the Restricted Application also effective May, 2020 and receives a lump sum payment of $5,172
• Robert switches to his own retirement benefit at age 70 and receives Social Security benefits of $2,845.

The above strategy provides for combined lump sum benefits of $16,476. 

Even if your clients are not able to file a Restricted Application, it may still make sense to consider the six months of retroactive benefits even though DRCs associated with these months will be lost.

The content on this blog is for informational purposes only and is not legal, financial, or professional advice. Social Security rules change periodically, so some information may become outdated. For the most accurate advice, consult a certified National Social Security Advisor (NSSA®). Social Security Professionals, LLC, and NSSA® are not responsible for any errors, omissions, or actions taken based on this blog's content. Use of this blog does not create a client relationship, and all information is provided "as is" without guarantees. By using this blog, you agree to hold Social Security Professionals, LLC, and NSSA® harmless from any claims or liabilities arising from its content. For personalized guidance, contact an NSSA® professional.