On Retirement

Retroactive Social Security benefits: Everything you need to know

Rules specify who qualifies for back benefits based on age and filing status

Aug 20, 2018 @ 9:18 am

By Mary Beth Franklin

A financial adviser contacted me recently to ask whether a widowed client, who had been eligible to collect Social Security survivor benefits at the earliest at age 60, could file for retroactive benefits now that she was 63.

Any type of Social Security benefit claimed before full retirement age, whether as a retiree, spouse or survivor, is permanently reduced and subject to earnings restrictions if a claimant continues to work.

But this client was a perfect candidate to claim reduced survivor benefits early since she was no longer working and therefore not subject to the earnings cap. She planned to delay collecting her own retirement benefits until 70 when they would be worth the maximum amount.

Her financial adviser had recommended that she claim her survivor benefits at 60. Even though her survivor benefit would be worth just 71.5% of her late husband's primary insurance amount, compared to 100% if she waited until her full retirement age of 66, she could collect them for 10 years before switching to her own maximum retirement benefits at 70. However, she never got around to filing for Social Security and now wondered if she could collect back benefits.

The short answer is no, but like anything else having to do with Social Security rules, there is a longer answer with lots of caveats.

In general, only people who file for Social Security benefits after their full retirement age are entitled to back benefits, and the maximum retroactive payment is six months, beginning no sooner than full retirement age.

So if someone claimed Social Security retirement benefits at 66 and four months, they could receive up to four months of back benefits in a lump sum instead of earning four months' worth of delayed retirement credits for claiming benefits after full retirement age.

Or, if they claimed benefits at age 67 — a year after they reached full retirement age — they could collect six months' worth of back benefits — the maximum amount of retroactive benefits — in lieu of earning delayed retirement credits for that same period.

Delayed retirement credits are worth 0.66% per month or 8% per year for every year that you postpone collecting benefits beyond full retirement age up to age 70. In most cases, electing to claim retroactive benefits in a lump sum permanently reduces ongoing monthly benefits.

But sometimes it makes sense to claim retroactive benefits.

For example, only a worker's retirement benefit earns delayed retirement credits when benefits are postponed beyond full retirement age. Spousal benefits and survivor benefits do not. They are worth the maximum amount when claimed at the spouse's or survivor's full retirement age. Therefore, someone who claims spousal or survivor benefits after their full retirement age should request the maximum six months of retroactive benefits (assuming they are at least 66 and 6 months old).

There are some exceptions to the retroactivity rules in cases involving surviving spouses and eligible surviving ex-spouses who were married for at least 10 years before divorcing. Generally, the availability of retroactive benefits depends on whether the deceased worker claimed benefits before full retirement age.

"Unless [her late husband] filed for his retirement benefits before his full retirement age, she will not be eligible for retroactive benefits," Jim Blair, a 35-year veteran of the Social Security Administration, said in response to my question about the widow's predicament.

However, Social Security does allow limited retroactivity for widows and widowers who are under full retirement age in certain circumstances, said Mr. Blair, who is co-founder of the National Social Security Association, which offers a certification for financial professionals.

For example, a widow or widower who is younger than full retirement age and who files for survivor benefits within one month of the worker's death can receive one month of retroactive benefits, starting with the month the worker died. That can be an important continuation of benefits for the surviving spouse since benefits paid to the worker during the month he or she died must be returned to Social Security.

Also, a widow or widower who is under full retirement age may qualify for up to six months of retroactive benefits if the deceased worker claimed reduced benefits before full retirement age. In that case, the surviving spouse or ex-spouse may be entitled to a larger benefit under the so-called widow's/widower's limit provision. That provision allows the survivor to receive either the amount the deceased worker was collecting at the time of his or her death or 82.5% of the worker's full retirement age amount, whichever is larger. Survivors who are subject to the widow's/widower's limit provision may be entitled to up to six months of back benefits.

Disabled widows and widowers, who are eligible to claim survivor benefits as early as age 50, can collect up to 12 months of retroactive survivor benefits if they claim survivor benefits before age 61.

0
Comments

What do you think?

View comments

Upcoming event

Sep 24

Conference

Diversity & Inclusion Awards

Attend an event celebrating diversity and inclusion as well as recognizing those who are leading the financial services profession in this important endeavor. Join InvestmentNews, as we strive to raise awareness, educate and inspire an... Learn more

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

Latest news & opinion

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

4 strategies for Roth conversions

There's never been a better time to do a Roth conversion, and here are several ways to go about it.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print