A little-known rule in Social Security allows retirees to claim retroactive benefits, potentially receiving checks for up to six months prior to their application date. This option is available only after reaching Full Retirement Age (FRA), which for those born in 1960 or later is 67. For example, if a retiree applies in August, they can request benefits dating back to February, but not earlier.
This retroactive option can provide crucial income for retirees facing unexpected expenses. However, it’s important to weigh the benefits against the loss of delayed retirement credits, which increase monthly payments by 2/3 of 1% for each month benefits are delayed past FRA. Claiming retroactive benefits could negate these credits, resulting in significantly lower lifetime income.
For financial professionals, understanding this rule can help clients make informed decisions about their Social Security strategy, balancing immediate financial needs with long-term retirement planning.
Source: fool.com