Social Security Bulk Payment-Rule Change
What does it mean to you?
Social Security currently has a rule that if you file for benefits at your Full Retirement Age (FRA) and then suspend your payments you can request payment IN BULK for any months you missed.
If for example at FRA you are to receive $2,000 per month and you filed at FRA but elected not to receive payments, at 68 (24 months later) you can get a back payment of $48,000.
You must file and suspend payments to be eligible for a bulk payment. If you are applying for Social Security for the first time, you are not eligible, but may receive a maximum of six months retroactive benefits. If you filed and suspended earlier, you can receive payments for any benefit missed.
Why does this matter?
Many people are wary of waiting to collect benefits after FRA for fear they will lose a substantial amount between their FRA and the time they apply. Should they become ill or their financial circumstances change, this provision gives peace of mind that if you wait, you will not have totally lost benefits between the ages of 66 and 70.
Should you choose this option, the amount you receive will be based on what you would have collected at FRA, not your current age. You would lose any Delayed Retirement Credits (DRC) you have accrued. DRC can raise your payment amount about 8% per year. You do not receive DRC if you are receiving payments. With DRC your monthly payment amount could increase by 32% over four years, and the increase is permanent. With a bulk payment you would not get this increase, but continue to receive payments at your FRA rate.
Why is it important now?
Recent changes in Social Security law eliminate the bulk payment benefit. While you are still able to file and suspend, you cannot go back and collect any benefits you missed while your payments were suspended.
If you are 66 years old, BEFORE May 1, 2016, you are still eligible for this benefit. You must file for benefits and suspend payments before the deadline.
Because of the specific deadline for all file and suspend claims, I recommend you apply as soon as possible. It stands to reason that the Social Security office will be inundated with requests. My brother-in-law applied in mid-January and was given a phone appointment on February 19th to suspend his payments—over a one-month wait. There is already a backlog.
The Bulk Payment option is a great benefit to have to fall back on should your circumstances change or if you just change your mind. If you are eligible, file and suspend. You have nothing to lose and much to gain if you do.