Should I Take 6 Months Of Back Pay, Or Wait Until Age 70?

Mar 29 2017 - 8:30am

Need help! I applied online on March 13, 2017 for benefits to start in July 2017, which is my 70th birthday. I got a call from SSA saying that I also had the option for my benefits to start retroactively, in Sep 2016. If I do this, I get a lump sum payment of $29,600 for those retro months, and $3015 per month going forward. If I follow my original plan and wait for my 70th birthday, I will get $3166 per month. So if I take the retroactive option, it's the lump sum of 29,600 as a tradeoff for getting payments going forward of $151 less than if I wait until July. If I take the retroactive option, it's a 16 year breakeven. But at the end of 16 years the lump sum would grow to $56k if invested at 4% compounded monthly. Compare that with a stream of payments of 151 per month for the 16 years at the 4% rate, which totals about $40k. The tax consequences of the lump sum payment are not a factor.
Sounds like a no-brainer: take the lump sum, let it grow, and take the lower monthly payment. What am I missing? If this is correct why don't I ever hear about anything but "wait until 70 if you can afford it"? Am I missing a potential impact on the survivor benefit (wife turns 58 this year)?
Can I trust the SSA representative. Just heard from them last week and I'm being pressed for an answer by the end of this week. Is there an actual deadline?
Thank you so much for looking at this for me.


It sounds like you have a good handle on your options, and it's your decision to make. There's not a hard and fast deadline to make a decision, but SSA may go ahead and process your claim with your initial month of election choice if you delay. I'm not an economist, so if you'd like to read Larry's take on this subject, refer to the following article:

As a widow, your wife could receive up to your full benefit rate, so it would lower her potential widow's rate if you choose to start drawing your benefits prior to age 70.

Best, Jerry