For RIAs and advisors
You told a client to wait past full retirement age. Now they are claiming at 68, and the first check is lower than the figure you showed them. The reason is timing, and it can be explained before they file.
For anyone born in 1943 or later, SSA adds 2/3 of 1 percent to the benefit for each month it is delayed past full retirement age, which SSA states as 8.0 percent for twelve months. The increase stops when the person reaches 70. The rule is in 20 CFR 404.313.
SSA puts it directly: when someone starts benefits before 70, some of the delayed retirement credits are not applied until the January after benefits start. The regulation spells out the split.
SSA also notes that its online calculator gives an estimate with all credits applied, for comparison. That estimate is the number a client may remember, and the first check will read lower by the credits still waiting for January.
Hypothetical example. A client’s full retirement age of 67 arrives in June 2027. Their benefit at full retirement age is $2,000 a month, and they start benefits in June 2028. The figures below ignore cost-of-living adjustments, rounding and Medicare premiums.
June through December 2027 is 7 months of credits: 7 × 2/3 of 1 percent is about 4.67 percent, so the initial amount is about $2,093.
January through May 2028 is 5 more months: 5 × 2/3 of 1 percent is about 3.33 percent. Those credits are added in January 2029, bringing the total to 12 months and 8.0 percent, or $2,160.
Until that January, the check is about $67 below the figure with every credit applied.
Past full retirement age, a client can ask SSA to start benefits before the month they apply. SSA says it cannot pay retroactive benefits for any month before the person reached full retirement age or more than six months in the past; 20 CFR 404.621(a)(2) is the source for the six-month limit.
That choice has a cost. Under 20 CFR 404.313, a delayed retirement credit is earned for a month in which the person is eligible but does not receive a benefit. Read together, the two rules mean that each month a client takes back is paid as a benefit and no longer earns a credit. Whether that is worth doing depends on the household, which is why it belongs in the conversation before the application.
A recommendation to wait holds up best when the first check matches what the client was told.
SSA says that when someone starts benefits before 70, some delayed retirement credits are not applied until the January after benefits start, while its online calculator gives an estimate with all credits applied. The first check includes credits through the end of the year before the year of filing.
Credits earned in the year benefits start are added beginning the following January (20 CFR 404.313(c)). For someone who starts benefits at age 70, credits earned in the year they turn 70 are added in the month they reach 70.
For people born in 1943 or later, 2/3 of 1 percent per month, which SSA states as 8.0 percent for twelve months. The increase stops at age 70.
After full retirement age, SSA can pay retroactive benefits for up to six months before the month of application, but not for any month before full retirement age (20 CFR 404.621).
Sources
Educational material, not tax or legal advice. Dollar examples labeled hypothetical are simple arithmetic on the rules above, not figures for any real client.
