A Texan couple looks for some clarification on their Social Security options and filing retroactively.
“I am 58, and my husband is 61. We plan to retire in three years and not collect Social Security until age 70. My question is whether, at full retirement age, we should each file and suspend even though we will not collect until age 70. I remember running across something in some literature that this was advisable in case you become ill between full retirement age and age 70. If you did not think you were going to live past age 70, it would allow you to ask Social Security to pay you retroactively as if you filed at age 70. Do I remember this correctly? Is this option available after you file at age 70? For example, if you started taking Social Security at age 70 but then come ill at age 71, can you have Social Security retroactively pay you as if you filed back at your full retirement age?”
Things have changed. Let me describe the old strategy.
If you didn’t need your Social Security benefits right away – and were going to claim them later, but you wanted to hedge your bet – you could file at full retirement age and immediately suspend. It gave you flexibility. The rule was that you could go into Social Security and say you changed your mind.
Say your full retirement age was at 66. You could go in and file, then suspend with the intention of delaying until 70. You could get to age 69 and 11 months and say, “I changed my mind. I don’t want to wait to get a higher benefit at 70. I wish I had been collecting benefits the whole time. Turn on my benefits as if I was collecting back at 66. And give me all the benefits between 66 and 69 and 11 months, as one big lump sum.”
You would give up the benefit of the delayed retirement credits by doing that, but you would get all the money that had accumulated during that period (age 66 to 69+).
People were using this as a hedging strategy, almost as an option. You could take the option of claiming at 70 or 66, depending on what your health situation looked like at 70. Well, Congress changed the rules and eliminated file-and-suspend. The lump-sum payment of suspended benefits was stopped.
A little bit remains. You can still claim retroactively for up to six months’ worth of benefits. But you don’t have to file-and-suspend to do this. This rule has always been the case. Once you get to your full retirement age, or past it, you can go in and retroactively claim your benefits back to your full retirement age or for up to 6 months, whichever is less.
So, again, let’s say your full retirement age is 66. If you go in at age 66 and 3 months and say, “Oops, I wish I would have claimed three months ago,” they will file your application and backdate it by three months. And they will pay you the three months of benefits that you ‘missed.’
In fact, they’ll do that up to age 66 and 6 months. But if you go in at age 67 (so you’re a full year past your full retirement age in this example), you can’t retroactively claim the entire year. It’s limited to that 6-month cap.
So, to wrap up, you don’t have to file-and-suspend to have access to six months of retroactive pay. It will be given to you simply by requesting that they backdate your application by those six months.
But the more strategic file-and-suspend option is gone. Congress closed what it considered to be a ‘loophole’ in 2015.