Many retirees and even some financial planning practitioners may not be aware of the ability for a specific subset of folks to be able to claim retroactive social security benefits. The benefits come as a lump sum and cover months in which the individual qualified for benefits but had not yet filed a claim. This strategy can be used for both retirement and disability benefits. Supplemental Social Security Income has no retroactive feature. Understanding how these benefits work, who qualifies, and the implications of retroactive payments is crucial for effective retirement or disability planning.For individuals 6 months past full retirement age (FRA) or older who have not yet claimed retirement benefits, there is an option to receive retroactive benefits. The individual's FRA is based on their year of birth, which is something you will want to confirm with a client given its importance in this situation. If the individual has reached their FRA and is not receiving benefits yet, they can apply for retroactive benefits for up to six months before the application date. The retroactive benefits would be a lump sum payment covering the six months before the application. This strategy is not available for those who have not reached FRA or who are receiving benefits before reaching FRA. This strategy is also available for spouses, and the same rules apply, meaning they would not be receiving benefits before FRA and would need to have reached their own FRA (as long as the individual filing for retroactive benefits has reached FRA, it does not matter if their spouse claimed benefits before reaching their FRA). Widows and widowers may be eligible for an additional month of retroactive benefits if they apply in the month after their deceased spouse’s death. The downside of receiving retroactive benefits is that future monthly benefits are calculated as if the individual had filed six months earlier, which reduces their future benefits.

For those who are approved for Social Security Disability Insurance, retroactive benefits can be paid for up to 12 months before the application date, assuming the individual was disabled for all that time. Be mindful of how this interacts with Social Security’s five-month waiting period. As an example, if an individual became disabled in July 2025 and applied for benefits in July 2026, the retroactive payments would only be available after the waiting period, which is 7 months under the rules.

Keep in mind that the retroactive benefits are taxable just like any other Social Security income would be. Those who are currently paying tax on 0-50% of their benefits may be up against the taxable income ranges that determine Social Security taxability. And given the increase in income expected with a 6-month lump sum, all but the lowest earners would likely see 50-85% of their benefits be taxable.

As with most things related to Social Security, the rules are complex. It is important to talk to the client about the trade-offs involved in this decision. While the additional money up front may be appealing, the reduction in future benefits may not make it worthwhile, especially if the current cash crunch is due to poor budgeting habits. On the flip side, it may be a good option for a client who needs an influx of cash for one reason or another (perhaps for an investment opportunity or a need for cash while waiting for the sale of a home), and would not suffer with the lower benefit moving forward.

Ryan Naples is a financial planner for The Hucko Group.

Editor: Greg Filbeck, CFA, FRM, CAIA, CIPM, PRM, Samuel P. Black III, Professor of Finance & Risk Management, Penn State Erie, mgf11@psu.edu.