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Old 06-04-2014, 05:59 PM
 
361 posts, read 622,323 times
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Had a milestone b'day ... even though I'm still working, Social Security is not going to increase any further so I applied online. They called me and said, we can take you back 6 months and give you a slightly lesser amount (reduced by $92/month) with a ~10,000 payout OR add in the $92/month with no payout. Since I am working, there will be a tax consequence with the payout... It sounds to me like an actuarial bet that i am not too confident to make. Please ... if anyone has advice or input, let me know what you think. I have a similar dilemma regarding a pension from an old job -- that one I gave to my financial adviser to help me decide. P.S., i think the payout amount is based partly on the widow's benefit I currently receive based on my late ex-husband's account! Thank you for your thoughts... they asked me to make up my mind and let them know by Friday.
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Old 06-04-2014, 06:15 PM
 
Location: VT; previously MD & NJ
2,230 posts, read 1,364,720 times
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Never heard of any kind of lump sum ($10,000) payout from social security. What is that about?
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Old 06-04-2014, 06:22 PM
 
Location: Los Angeles area
14,018 posts, read 17,772,783 times
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Quote:
Originally Posted by ansible90 View Post
Never heard of any kind of lump sum ($10,000) payout from social security. What is that about?
Isn't the OP saying that SS is willing to "back date" her application and therefore her start date, so that the monthly amount will be $92 less? But in that case SS owes her for the months at the lower rate which were never paid? At least that's how I understood her post. So it is not exactly a "lump sum" as we normally understand that term, but rather receipt of monies previously "owed" from the backdating.

OP, please correct if I misread you.
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Old 06-04-2014, 06:35 PM
 
Location: Florida
4,380 posts, read 3,722,412 times
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Wait as long as you can. You have too much missing infomation
give a good answer.
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Old 06-04-2014, 06:37 PM
 
361 posts, read 622,323 times
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Quote:
Originally Posted by Escort Rider View Post
Isn't the OP saying that SS is willing to "back date" her application and therefore her start date, so that the monthly amount will be $92 less? But in that case SS owes her for the months at the lower rate which were never paid? At least that's how I understood her post. So it is not exactly a "lump sum" as we normally understand that term, but rather receipt of monies previously "owed" from the backdating.

OP, please correct if I misread you.
That is correct.
Thought this would be a straightforward thing... that I would not be faced with a decision. They would pay me based on a November start date vice a May start date.
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Old 06-04-2014, 06:55 PM
 
Location: OH>IL>CO>CT
5,256 posts, read 8,442,829 times
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I just went thru the same thing.
I turn 70 in August, and applied online in May to start benefits on my own record. (I too was/am receiving a Survivors benefit.) Got phone call from SSA with, among other things, same offer of a 6 month retroactive lump payment. Approx $9000 with a $120/month reduction from my otherwise full benefit at age 70. Since my plan all along was to maximize the monthly benefit, and am not in current need for cash, I declined the offer.

About 10 days later got a packet in mail recapping the application information.

BTW, the 6 month back date would have been from May to previous Nov, not Aug to Feb. Also I am to get a new Medicare card with my own SS #. Original was issued with spouse's SS#. Also payment date switches from 3rd Wed to 4th Wed of month. (My, but the gov't moves in strange and mysterious ways.)
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Old 06-04-2014, 06:56 PM
 
Location: Jamestown, NY
7,841 posts, read 7,347,727 times
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Up to 85% of your SS benefits can be taxable if your non-social security income is over a certain amount as determined by a complicated formula. There's work sheet in the tax form instructions on how to figure the taxable amount. If you're going to take your benefits and continue to work this year, you might owe tax on your SS, and you'd owe more tax on the lump disbursement because it's a bigger amount. OTOH, the lump sum would be a nice bit of change.

My suggestion is to see if your city/town/county has an office for the aging or some kind of senior assistance center where somebody can help you figure this out.
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Old 06-04-2014, 07:07 PM
 
Location: Wisconsin
21,549 posts, read 44,115,619 times
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Quote:
Originally Posted by HarryLou View Post
Since I am working, there will be a tax consequence with the payout... It sounds to me like an actuarial bet that i am not too confident to make. Please ... if anyone has advice or input, let me know what you think. I have a similar dilemma regarding a pension from an old job -- that one I gave to my financial adviser to help me decide.
You say you have a financial advisor. Only he has your complete picture and can give you correct answers.

Tax consequences on that lump sum and the fact the lump sum might turn otherwise untaxable SS benefits into taxable benefits might make the financial hit even worse. That $10k could be become $6k very easily - net after additional taxes.

On the other hand, foregoing the $10k/$6k for an increase of only $92 in monthly benefit probably would have me taking the lump sum and spending the rest of year figuring out how to minimize taxes.

Since you're still working, increasing your contributions into tax-deferred IRAs/401k/HSA are excellent moves to have your cake and eat it, too.You can contribute up to $6,500 to a tax-deferred IRA if you are over 50. If you have an employer-sponsored 401k, increase your contribution to that, as well.

I did that when I worked after FRA. All my SS benefits went into tax-deferred accounts, as my nest egg needed some serious shoring up. Very happy I did that.

Last edited by Ariadne22; 06-04-2014 at 07:48 PM..
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Old 06-08-2014, 08:37 AM
 
361 posts, read 622,323 times
Reputation: 496
Default My decision...

Went with the higher monthly amount.
Like Reed303, originally thought to maximize the monthly amount for after retirement.
Guess I could invest the payout, but likely it would go into the "system" and get spent...
And good grief the taxes...
As far as break-even, if I'm dead I won't care.
Thank you for your ideas...
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Old 06-08-2014, 05:36 PM
 
Location: Maryland
282 posts, read 306,689 times
Reputation: 338
This is the classic it depends, typically on your income level (now and in retirement). What is right for a low income person is not right for a mid or higher level income person. Same for life expectancy.
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