When it comes time to apply for Social Security pension benefits, you could be given the choice of receiving as much as six months’ worth of money in a lump amount. While not always the most financially advantageous option and not available to everyone, this decision can be a wonderful way to optimize your Social Security payments.
Social Security Benefits; Source- The Motley Fool
Social Security Benefits For Retirees
Most people can begin applying for pensions from Social Security when they turn 62. But larger monthly payments may result from delaying until the full age of retirement or even until age 70. From age 62 until age 70, the benefit rises by 8% per year. When you attain the full age of retirement, you are eligible to make a lump-sum claim for a maximum of six consecutive months of payments. You can ask for a check for the advantages you would have gotten if you had started claiming benefits in July, for instance, if you reach full retirement age in July but elect to wait until January of the year that comes after.
One Time Payment From Social Security
Remember that you have to wait a minimum of six months past your full retirement age to get the entire six months’ worth of benefits in a lump sum and that you cannot make a retroactive benefit claim if you haven’t achieved full retirement age. The one-time payment in full may be significant. The typical Social Security monthly payment as of 2023 is $1,827. You can be eligible for a lump sum payment of $10,962 if you choose the entire six-month period of retroactive payments. There is a cost associated with claiming retroactive compensation. Your qualifying age will be determined as if you had made a claim six months earlier if you accept 6 months of retroactive payments.
Full Retirement Age For Social Security Benefits
This is a crucial factor to take into account because your claiming age has a big impact on the amount of your monthly benefit. For instance, if you apply for 6 months of retroactive payments when you reach 68, your future payments will be reduced by 4% since your claim would be treated as if it were made at age 67.5. Therefore, if your monthly payment had been $2,500 when you were 68, it will now be $2,400, a lifelong decrease. You’d get a lump sum payment of $14,400 in exchange, which is 6 times the $2,400 per month payment you’d get at age 67.5. Several variables, including your current financial status, health, and life expectancy, will determine whether or not you should claim the lump payment.
The lump sum can be economical if your current state of health doesn’t indicate a long life expectancy. It can be alluring to choose to get a one-time payment Social Security benefit because it provides a sizable sum upfront. However, there is a price to pay in the form of diminished monthly benefits. Before selecting a choice, thoroughly analyze the advantages and downsides, your financial status, and your physical and mental health. You can also assess the best method of action to take for your particular situation by speaking with a financial counselor.
