Chris Stein, CFP®
Question on Delayed Retirement Credits
Today we have a question from a reader about a past blog post. Back in May, 2017 I posted an article describing exactly how the Delayed Retirement Credits are applied to your SS retirement benefit when you have delayed filing past your full retirement age.
After reading that article, a reader sent me the following question:
“Chris, I have a question about a Social Security claiming strategy. In your blog dated May 10, 2017, Delays in Your Delayed Retirement Credits, you explain how the delayed benefit is calculated each January. This impacts my plan. My birthday is in November, and I was planning to claim at age 68 (in November 2020) to get the 16% increase in benefit. The Social Security website calculator shows only a 9% benefit if I claim in that month, and your blog explains why.
I had heard about the SSA retroactive benefits to give you a lump sum benefit for up to 6 months. If I wait until January, 2021 to claim benefits (after they have recalculated the delayed benefit), and have them backdate the application to November 2020, would I get a lump sum that reflects the full 16% increase for those backdated months?”
The simple answer here is no, they will not give you the full 16% increase for delaying for the months of November and December of 2020. When you file retroactively you will receive benefits as if you had filed on that earlier date. As mentioned in the previous article, the SSA does not ever make up the shortfall of the delayed retirement credits. They are simply lost, so filing later but retroactively will not cause them to pay out more than they would have if you filed on November 1st, 2020.
Remember that you can file retroactively for up to 6 months, or back to your full retirement age, whichever is less. This gives you the flexibility to fix a missed filing date, but will simply create a benefit as if you filed at that prior date. You will receive those retroactive months in a lump sum, but they will not be any larger or smaller than if you had filed back on that previous date.
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