The majority of people think of Social Security as a government program that provides Americans who are retired and members of other groups with regular payments that can be put toward the purchase of necessary things.
However, not many people are aware that beneficiaries also have the option of requesting a lump sum payment of a portion of their benefit, providing that they meet specific criteria.
People can start collecting Social Security benefits as early as the age of 62, but they will have to wait until at least the age of 66 (for those born between 1943 and 1954) to get their full monthly entitlement payment.
This retirement barrier increases by two months for those born after 1954, culminating in a threshold of 67 years old for anyone born in 1960 or after.
You have the option of delaying the start of your Social Security benefits until you reach the age of 70 if you want the amount of money you get from the program to be higher. Once you begin to make claims for this benefit, this increases the amount of monthly compensation you are eligible for.
You need to have achieved your full retirement age to be eligible for the lump sum payout from Social Security; here is everything you need to know to make your claim for it…
How exactly does one go about receiving their lump sum payment from Social Security?
The Social Security Administration (SSA) is in charge of administering the retirement benefits program and gives those who are qualified the opportunity to boost the amount of money they receive each month as part of their benefits package by delaying receipt of their benefits until after they have reached their full retirement age.
If you do so, your monthly payment will increase up until you reach the age of 70, at which point it will remain the same regardless of your entitlement.
If, on the other hand, you chose not to begin collecting Social Security benefits at the age at which you were eligible to do so, you can still make a request for a back payment equal to up to six months of the full benefit amount.
If you elected to delay filing for Social Security benefits when you reached the full retirement age of 66, for instance, the amount of money you are entitled to receive each month after that date will be higher than it would have been otherwise.
On the other hand, if you changed your mind and decided that you wanted to start making payments, you had the option of requesting up to six months’ worth of back payments in the form of a lump sum payment.
If your benefit at full retirement age was $2,000 per month, then you would be eligible to receive up to $12,000 in a lump sum payment.
However, this would only be possible if you had delayed your Social Security benefits for at least six months before making this claim.
Naturally, doing so would result in a reduction of the delayed retirement credits you currently have, which in turn would have an impact on the total amount of money you would receive in the future.
What impact, if any, would receive my Social Security benefits in one lump amount have on my annual tax filings?
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You shouldn’t let the idea of a one-time payment get the better of you without first considering how this would affect your financial situation, particularly about taxes.
If your joint income is more than $25,000, you can expect to have up to 50 per cent of your Social Security payments taxed.
If your combined income is more than $34,000, you can expect to have up to 85 per cent of your Social Security benefits taxed.
These data, which relate to the proportion of payments that are subject to federal income tax, are not related to the rate at which these payments will be taxed. I want to make sure that everyone understands this.
The decision to take your Social Security benefits in a single, lump sum could push you into a higher tax bracket, which would mean you would have to pay taxes on a much bigger percentage of your income than you would have otherwise.
If the payment brings your yearly income up to more than $85,000, then you will also see an increase in the amount that you pay for your Medicare premiums.
