Don’t Forget About this Social Security Claiming Strategy

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It’s a little known strategy, but it might prove beneficial to older Americans who have reached full retirement age, who have not yet filed for Social Security, and who might need some extra cash right now - for one reason or another.

That’s right, you may be entitled to a retroactive payment, a lump sum check representing up to six months of your Social Security benefit, according to David Freitag, a financial planning consultant and Social Security expert for MassMutual.

According to Freitag, this strategy works for someone who missed the window to apply for Social Security at FRA and now wants to start their benefit.

Now, you can’t apply for retroactive payments prior to FRA and there is at least one drawback to this strategy, according to Freitag. Request a retroactive payment means you're effectively taking benefits as if you started them six months earlier. Thus, your benefit will be less than what your benefit would have been had you not taken the retroactive payment.

“You’re basically turning the clock back six months as though you had filed six months ago,” Freitag says. “And then that reduced payment goes for the rest of your life.”

Still, it is a window of opportunity to create what could be a significant amount of money, says Freitag. For instance, it could represent a check for $12,000 for someone whose monthly Social Security benefit is $2,000. It “might be a very good safety net out of an economic problem,” says Freitag.

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