How to get social security lump sum payments


Getting the most out of Social Security is essential, especially if you are or are nearing retirement. The monthly payments will give you financial support for the rest of your life.

However, many people find it helpful to have more cash on hand when they retire. Monthly checks are useful, but it’s hard to use them for big ticket items. Fortunately, there is a way for Social Security recipients to apply for and get a lump sum payment. Before using this strategy, however, it’s important to know what’s involved and what you’re potentially giving up.

The little-known flat-rate social security option

Most people claim their Social Security benefits simply by asking the government to start sending monthly checks. This is the only option if you have not yet reached full retirement age, which ranges from 66 to 67 for those who are currently nearing the end of their careers.

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However, once you have reached retirement age, you have the option of retroactively claiming overdue Social Security payments. You can never claim a lump sum that includes months before you reach full retirement age, but the longer you wait beyond that age, the more months of benefits you can include in that amount. lump sum.

The absolute maximum lump sum payment the Social Security Administration will make is six months of benefits. So if your full retirement age is 67, you will be eligible for the maximum of six months if you request a lump sum at any time after you turn 67 and a half.

It’s easy to see how this could be of help. With an average worker benefit of around $ 1,500 per month, a lump sum could put $ 9,000 in your pocket quickly. It’s a good nest egg to start your retirement.

Why a lump sum might not be right for you

Although these lump sums are large, many people do not ask for them. Most people want to get benefits early, when lump sums are not available. And even if you wait, you have to give up something in return.

The social security administration treats those who claim lump sums as if they had applied for social security in the month corresponding to the first payment that is part of the lump sum. In the example above, if you reach the age of 67 1/2 and claim six months of benefits in a lump sum, the amount of these benefits will be calculated as if you had claimed the right at 67 and not at 67 1/2. This would give you six times your regular monthly payment, all at once.

On the other hand, if you applied for regular benefits at age 67 1/2, your payment amount would benefit from a 4% increase due to the delay in retirement credits. Again, using the basic monthly amount of $ 1,500, the trade-off for getting that lump sum of $ 9,000 is that you won’t get a higher Social Security check of $ 1,560 – both now and for the rest of your life.

What is right for you?

There is no right or wrong answer that applies to everyone. For single retirees who don’t expect to live long enough for an extra $ 60 a month in benefits to make a big difference, having $ 9,000 up front might be worth it. For others – especially those whose spouses will be dependent on family benefits determined by the working spouse’s claim decision – forgoing the extra monthly money is not worth a small lump sum at this time.

The only thing to understand, however, is that you shouldn’t see flat-rate Social Security as a free answer to your financial needs. It comes at a cost that you have to be prepared to pay before you take the money and run.


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