You can get a bonus from Social Security, but it’s not without risks


Q. I have eschewed Social Security until now, age 68. I planned to wait until age 70 but COVID-19 forced my hand. I filed and to my pleasant surprise, the representative said I could wait three months to get the 8% higher payment you get each year, or I could accept my current payment, start immediately and get a lump sum bonus of $19,000 by backdating my claim by six months. Mental math said it would take 12 to 13 years of the higher payment to break even. Am I missing something? The decision seems obvious.
— Figuring it all out

A. The retroactive payments and getting a lump sum seems nice, but there are some items to consider.

First, you are eligible for retroactive payments, which are one-time payoffs, if you delay filing for benefits past your full retirement age.

The maximum you can get in a lump sum is six months of benefits.

If you’re only two months past full retirement age, you’ll only get two months in a lump sum.

So if you choose to get retroactive benefits, your actual filing date is pushed back, and you’re basically trading lower monthly benefits for the rest for a lump sum today.

Even if you think the smaller benefit is a worthwhile trade-off, there may be some unintended consequences.

For starters, the smaller benefit will mean your spouse will also get a smaller benefit if the spouse takes benefits on your record.

Because the move pushes back your filing date, the benefit will be smaller than the one you would qualify for today.

Next, getting a lump sum could push you into a higher tax bracket, and it could even push up your income enough that you have to pay more for Medicare.

We’re not saying you shouldn’t make the move, but we want you to consider the entire picture.

Between the ages of 66 and 70, that is an 8% increase per year, or 32% more in total to your benefit, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

Either way, you would be entitled to the cost-of-living adjustments, which have been averaging around 2.6%, she said.

The decision of when to take your benefits largely depends on other factors such as need, other income-producing assets, your health, and if you are married, who is the higher income earner, she said.

“If you need the extra income, and there are no other alternatives to bridge to the maximal benefit at age 70, then by all means, take the benefit,” D’Agostini said. “If you can utilize some other investments to close the gap, it might make sense.”

She said you should consider your overall financial plan when making any of these decisions.

“If you are in poor health, then it might make sense to start now, unless you were the high wage earner with the larger benefit,” she said. “Upon your death, your spouse can move up to your higher benefit which extends the payment even longer.”

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This story was originally published on May 26, 2020. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.