• Chris Stein, CFP®

Retroactive Social Security Benefits

A reader from Massachusetts looks for clarification on his retroactive Social Security benefit.


“My age is 67 + 2 months. I am considering filing for Social Security now so I can invest the proceeds. If I file today for retroactive benefits, will I receive a lump sum? How many months of benefits will that be? My current monthly benefit is estimated to be $2,694.”


Your question is pretty straightforward.


At age 67 and two months, you are well past your Full Retirement Age (FRA), at which time you qualify for 100% of the monthly benefit calculated from your lifetime earnings. That opens the door to filing what Social Security calls a “retroactive claim.” The rule is that you can file a retroactive claim for your Social Security retirement benefit for up to six months or back to the month of your FRA – whichever is shorter. In your case, you’re more than six months beyond your FRA, so you have retroactive access to the full six months.


You ask, “Will I receive a lump sum?” The answer is yes, but that lump sum is not paid on the spot.


By filing a retroactive claim, Social Security enters the claim into the system as if you had claimed six months before you contacted the office. And since they missed sending you those monthly payments, they’re making you whole by sending you a lump-sum payment.


Often you will start to receive your monthly benefits a little before you see the lump-sum amount deposited in your account for those six months of missed benefits. This results from the behind-the-scenes mechanics of how Social Security works. You will get into the automatic system immediately and receive your monthly benefit on whichever Wednesday your date of birth determines.


But my understanding is that the 6-month lump sum requires a more manual process. You’ll usually get the lump-sum payment within 60-90 days of requesting it, catching you up for the six months you essentially missed.


Claiming retroactively does have a future cost, though. Having passed your FRA, you are already earning delayed retirement credits. When you put in your retroactive application, Social Security will start your benefits as if you had initiated them six months earlier, and you will get the amount you would have received at that earlier time. (You can’t have your cake and eat it, too.)


So you won’t get the nearly $2,700 you estimated, but something lower than that. By losing some of the delayed credits you have earned, your initial benefit payment will be reduced by two-thirds of one percent for each back-paid month or four percent for the entire 6-month retroactive period. (And any reduction will affect payments for life.)


Now, your use of those funds is out of the scope of this question. Your strategy may or may not work out for you, depending on many factors unique to you.


Hopefully, you have gone through the analysis of taking that lump sum and investing it. If your analysis tells you that you won’t need the additional monies later – including the portion you gave up to access the lump sum – that is a decision for you to make. But there are no guarantees.


What we discussed above is simply what happens if you do decide to claim retroactively.

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