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Some Social Security Beneficiaries Can Get Retroactive Payments -- But at a Cost

Posted by Aubrey Carew Sizer | Jun 27, 2022

If you have waited beyond your full retirement age (66 for those born between 1943 and 1954) to begin collecting Social Security benefits, you have the option of asking for back payments. The maximum that Social Security offers is six months' worth of retroactive payments in a lump sum. The downside is that by taking the lump sum, your retirement date and the amount of your monthly benefit are rolled back six months. 

When you delay taking retirement beyond your full retirement age, you amass “delayed retirement credits” that increase your benefits by 8 percent for every year that you wait, over and above annual inflation adjustments. By taking the lump-sum payment, you lose the delayed credits that you had accumulated over the previous six months, so your monthly benefit will be lower than if you did not take the lump sum -- forever.  So, for example, if by taking the six months of retroactive benefits your regular monthly benefit is reduced by $150 and you live another 25 years, you're foregoing $45,000 over that span.  

Whether you should take the lump sum payment depends on a number of factors, including your life expectancy, your spouse's needs, and what you will do with the new money. Taking the lump-sum payment makes more sense if your life expectancy is shorter. In this case, the immediate cash infusion will be more beneficial than bigger monthly payments. However, if you are married and are the higher earner, you will want to consider your spouse's needs. If you die, your spouse will receive spousal benefits equal to the monthly amount of your benefits. The higher your benefit, the more your spouse will receive. 

You also need to consider what you will do with the lump-sum payment. If you are paying off high-interest debt or investing in something with a good rate of return, the lump sum might be better than having the higher monthly payment. 

For more information about Social Security, click here.

About the Author

Aubrey Carew Sizer

Aubrey Carew Sizer is the Principal Attorney of The Law Office of Aubrey Carew Sizer PLLC, a Northern Virginia law firm providing representation for Wills, Trusts, and Estate Planning, Long-Term Care Planning, Guardianship and Conservatorship, Special Needs Planning for the Disabled, and Probate, Estate and Trust Administration.

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The Law Office of Aubrey Carew Sizer PLLC provides customized and affordable estate planning (including wills, living trusts, powers of attorney, and advance medical directives); elder law services (including long-term care planning, special needs planning for the disabled, and guardianships and conservatorships); probate, estate and trust administration (including advising executors and administrators of estates about post-mortem planning and the local probate process in Virginia), as well as general aging and disability advice in Northern Virginia, including but not limited to Arlington, Alexandria, Ashburn, Bristow, Burke, Centreville, Chantilly, Gainesville, Fairfax, Falls Church, Haymarket, Herndon, Leesburg, Manassas, Manassas Park, Reston, Springfield, Sterling, and throughout Loudoun, Prince William, and Fairfax counties.

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