I often get questions about Social Security and it’s no wonder with all the possible claiming strategies designed to increase benefits.  I’ve seen folks agonize over the best strategy for them and if married, their spouse.  The truth is, unless you can tell me the month and year you will die and the same for your spouse, the tougher it is to know if you are making the right claiming decisions.

One radio caller recently told me he filed and immediately suspended his Social Security benefit at age 66, what we call “full retirement age” or FRA.  He’s now 69 and said he could really use the cash due to his wife’s illness.  His question was whether he’d have to pay taxes on the retroactive lump sum he was requesting from Social Security.

Here’s the background.  Social Security will allow you to take a retroactive lump sum of all the benefits you would have earned since FRA.  In this case, the lump sum was $72,000.

Sounds good so far but two things you need to know.  First, 85% of this $72,000 will be subject to ordinary income tax rates.  Second, because of this large one-time payment, your Medicare Part B will most likely be up-charged for one year, higher than the $104 per month most folks are paying.

Questions about Social Security or the myriad of claiming strategies?  Give us a call at 215-657-9200, and let’s match up calendars.