Dear Professor Kotlikoff:

Thank you for your articles, books, blog and software! Your advocacy is a great service to all Americans.

I hope you will answer this question because I realize it is relevant to only half your readers (but possibly 75% of couples), with a birthday from June 2nd to December 1st, and that the income-deferral trick I envision skews to the benefit of the earlier part of that window (i.e., June). But here goes…

I'm unmarried, 69 in June. I plan to wait to age 70 to claim Social Security, but I want to delay payments for six months and receive a lump sum the following January (in the next tax year). This would allow me one more year of Roth IRA conversions without triggering the phase-in of SSA benefit taxation. Additionally, in that first year of retirement, the lump sum would allow me to live on SSA benefits alone and completely avoid federal income tax by keeping my "provisional income" below the threshold where SSA taxability begins.

The obvious question is, can I achieve this income-deferral trick? If so, the question is procedural; specifically when and how do I apply for benefits so that I accomplish this maneuver and SSA can’t screw it up (or if they do, I can get it fixed)?

Thanks!

-Kevin

Hi Kevin. I wouldn't call it a trick, but if you'll reach age 70 in June 2023 then you could apply for benefits as late as the last business day of December 2023 and still be able to claim benefits effective with June 2023. Social Security applications filed at least 6 months after a person's full retirement age (FRA) allow for up to 6 months of potential benefit retroactivity.

Social Security benefits aren't taxable until the year of receipt regardless of the year for which they're paid. Therefore, as long as you don't receive any benefit payments in 2023, then any benefits that you're paid after that wouldn't be taxable on your tax return for the calendar year of 2023.

Best, Jerry