Today’s Social Security column addresses questions about when you might need to and when you can file retroactively, how disability benefits are calculated versus standard retirement benefits and reduction rates for filing early. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
If My Social Security Application Is Late, Can I Still File Retroactively Now?
Hi Larry, I think I’m late in applying for my early Social Security retirement benefits. I plan to retire in September and had hoped to start my benefits then as well but I believe I may have neglected to file in time. Do I have to file four months before I start my benefits? Do I need to apply retroactively? Can I do that? Thanks, Carl
Hi Carl, It doesn’t sound to me like you’re late. You can apply any time though September 30 2022 and still claim benefits effective with September 2022. And yes, if your claim isn’t processed in time, then Social Security would pay any back pay due when your claim does get processed. Just an FYI, if you claim September as your entitlement month, your first payment would then be due in October. Social Security pays benefits a month behind.
However, when you claim benefits prior to your full retirement age (FRA), you can’t claim benefits for any months earlier than the month of your application. So you couldn’t, for example, apply in October and claim benefits retroactively to September since you’re not yet at your FRA.
Before you apply, though, you may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Why Doesn’t Your Benefit Rate Go Up When You Reach Full Retirement Age If You’re Getting SSDI?
Hi Larry, Why is it that your Social Security amount won’t be higher at FRA than what you get for SSDI? That doesn’t seem fair. Thanks, Brian
Hi Brian, Social Security disability (SSDI) benefits are calculated based on a person’s Social Security covered earnings, as are Social Security retirement benefits. In other words, both benefits are calculated based on the same earnings and using the same basic calculation formula.
The only difference between the calculation formula for SSDI benefits vs. unreduced Social Security retirement benefits is that fewer calculation years are used to calculate SSDI benefit rates if a person becomes disabled prior to 62. That acts to prevent a person from being penalized for not having earnings in years that they weren’t able to work due to their disability.
Basically, qualifying for SSDI benefits simply entitles a disabled person to be paid their full unreduced Social Security retirement benefit rate before they reach FRA, which is why their benefit rate doesn’t change when their SSDI benefits convert to regular Social Security retirement benefits when they reach their FRA. Best, Larry
Would It Make A Difference If My Sister Takes Her Social Security At 65 And Six Months Instead Of At 65?
Hi Larry, My sister was born in 1957, so her full retirement age is 66 and 6 months. Her plan is to take her Social Security retirement benefit when she turns 65. Will it make a difference if she waits to file at 65 and six months benefits? Thanks, Betsy
Hi Betsy, Yes. Social Security benefits are reduced for each month that you start drawing prior to full retirement age (FRA). The percentage reduction applicable in your sister’s case would be 5/9ths of 1% per month. So if your sister claims her Social Security retirement benefits 18 months prior to her FRA, her unreduced rate will be reduced for age by 10%, vs. a roughly 6.66% reduction if she start drawing 12 months prior to her FRA. Best, Larry