I regularly get emails from readers who turn a small molehill of a problem into a big mountain of a problem, and that has to do with the start date of their Social Security benefits. The Social Security pension application asks a question that goes something like this: “What month do you want your benefits to start?” Far too many people think too much about the question, and it’s especially annoying for those who absolutely insist that their benefits begin at their full retirement age — not a month before and not a month later. (At the end of this column, I’ll point out why people shouldn’t be so hung up on this FRA start-date company.)
For now, here’s an example. Frank wants to wait until full retirement age, 66 and 4 months, to receive his Social Security benefits. He will become FRA in December. So when the application asks “When do you want your benefits to start?” Frank should reply, “December.” It really is that simple.
But then Frank starts to think too much; here’s what i mean by that. He knows that Social Security checks are always a month behind. In other words, the December Social Security check is actually sent in January. Now Frank is concerned that if he states that he wants his payment to start in December, SSA will interpret that as wanting his first check to come in December, meaning it would be the payment for November. And if his benefit went into effect in November, that would cut his full retirement age by a month.
Then Frank thinks even harder and thinks he should answer the question by saying he wants his benefit to start in January, knowing that that would be December’s Social Security benefit. But if Frank does indicate January as the starting month, he will not receive his first payment until February.
As I’ve explained a hundred times in this column, you don’t have to worry about Social Security check payment dates. The application question doesn’t ask when you want your first Social Security check to physically appear in your bank account. Instead, you will be asked which month you want to be the first month in which you qualify for Social Security benefits.
The folks at the Social Security Administration know this has been a problem because they’ve gotten a lot of phone calls from panicked pension applicants who misinterpreted and incorrectly answered the question, or at least what they consider to be incorrect (more on that later). So they call to see if they can change their answer, which creates a lot of extra work for SSA’s representatives and computer systems.
According to quite a few readers who have reported this to me, SSA has changed the question on the online retirement form, at least for people approaching full retirement age. It now reads: “Would you like to start your benefit without a permanent discount at the earliest?”
This is a bit of a mouthful, and more than a few readers told me they needed a few readings of that line to decipher it. But if you’re approaching full retirement age and want your benefits to start, you can rest assured that your benefits will begin the month you reach FRA — not a month before, and by simply answering “Yes” not a month later .
So now let me come back to this issue of confusing yourself about starting your benefit at exactly the right month. To explain where I come from, let’s go back to Frank’s case. In the following examples, let’s assume his FRA benefit is $2,500 per month. I said he will be 66 and 4 months in December, and he wants his benefits to start then. He must therefore indicate December as his starting month. Or if he completes the online application with the new question: “Do you want your benefit to start as early as possible without a permanent discount?” – he would answer: “Yes.”
Let’s just say he didn’t. Suppose he said he wanted his benefit to start in November because he thought that was the check coming in December. That essentially means that the start date of his benefit would be 66 years and 3 months, one month before his FRA.
Retirement benefits are reduced by about half of 1% for each month they are withdrawn before FRA. So instead of getting $2,500 a month, Frank’s payout rate would be about $2,488 – meaning he’s losing $12 a month forever. That’s the bad news. But on the bright side, by choosing November as the starting month, Frank did get an extra check for $2,488. It’s going to take Frank about 207 months before he gets on the short side of Social Security. In other words, Frank will be 83 years old before his alleged “mistake” catches up with him.
A panicked Frank might be tempted to call SSA to change his effective date, meaning that he would withdraw that first claim, refund the one-month reduced pension he received, and file a new claim. But I’d tell Frank not to worry about it. Take the extra check for $2,488 and make it a party!
Now let’s say Frank went the other way – meaning he chose January as his starting month, thinking the December check will come in January. But by choosing January, he will not receive his first Social Security benefit until February. As in the previous example, Frank panics and thinks he should contact the SSA to correct his alleged mistake. But again, I’d tell Frank to relax. Of course, he will miss out on one Social Security check (the December benefit that would have been paid in January). But the upside is that Frank’s revolving benefits include a two-thirds 1% increase in “deferred retirement credit” for starting his benefits once a month after his full retirement age. If Frank lives long enough, at some point he will come forward with what he thinks was a wrong Social Security decision.
If you have a Social Security question, Tom Margenau has two books with all the answers. One is called “Social Security – Simple and Smart: 10 Easy-to-Understand Fact Sheets That Will Answer All Your Social Security Questions.” The other is “Social Security: 100 Myths and 100 Facts.” You can find the books on Amazon.com or other bookstores. Visit the Creators Syndicate website at www.creators.com to learn more about Tom Margenau, read past columns and see features from other Creators Syndicate writers and cartoonists.
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