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Thinking of Claiming Social Security During COVID-19? 4 Things You Need to Know

By Maurie Backman – Jul 1, 2020 at 6:47AM

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The COVID-19 crisis has upended so many Americans' lives from a financial standpoint, and that includes older workers who are grappling with unemployment and income loss. If the pandemic has caused you to contemplate claiming Social Security, you're probably not alone. Those benefits are a good way to secure income at a time when you need it. But here are a few things you must know before you sign up.

1. Signing up early will reduce your benefits for life...

You're entitled to your full monthly Social Security benefit based on your earnings history once you reach full retirement age, or FRA. Your FRA hinges on your year of birth, and it's either 66, 67, or somewhere in between. If you haven't yet reached FRA but are at least 62, you can sign up for Social Security to get your hands on the income you might need immediately to cover your expenses. But filing early comes at a cost. For each month you claim benefits ahead of FRA, they're reduced on a permanent basis, so while signing up for Social Security may be a good way to improve your cash flow immediately, it will also have long-term repercussions.

Loose stack of Social Security cards

Image source: Getty Images.

2. ...but not necessarily

That said, there is a way to collect income from Social Security without slashing your benefits for life: Undo your filing within a year. That doesn't just mean sending the Social Security Administration (SSA) a note that you've changed your mind about receiving benefits and calling it a day; it also means paying back every dollar in benefits you collected within 12 months of receipt. However, it's an option to keep on the back burner if you're desperate for money now, but you manage to become gainfully employed again later on in the year or early next year.

3. You can claim Social Security if you're collecting unemployment

If you lost your job during the COVID-19 crisis due to no fault of your own, you're likely entitled to unemployment benefits. And rest assured that you can, in fact, receive unemployment and Social Security at the same time. But if you're collecting the former, don't rush to sign up for the latter right away, especially if you haven't yet reached FRA.

Right now, workers on unemployment get an extra $600 a week on top of their regular benefit, and while that provision is set to expire at the end of July, lawmakers are fighting to extend it. As such, it pays to see if you can live on unemployment before claiming Social Security, especially if that boost remains in effect longer than it was initially supposed to.

4. You can request a lump sum payment if you delayed your filing

Just as claiming Social Security before FRA results in reduced benefits, delaying benefits past FRA boosts that income stream on a permanent basis. In fact, for each year you hold off on filing past FRA, your benefits go up 8%, up until age 70, at which point they can't grow any higher. It's for this reason that some seniors choose to delay their filing. But if you went that route and need money now, you're entitled to request retroactive benefits to put a lump sum of cash in your pocket.

You can claim up to six months' worth of retroactive benefits dating back to your FRA so that if your FRA was 66, and you're now 66 1/2 and have yet to file for Social Security, you can request six months of payments immediately. If you do, the boost in benefits you'd otherwise be entitled to for waiting six months will go away, but you will get a pile of money in exchange that could be instrumental in helping you get through the pandemic. Keep in mind, though, that retroactive benefits only come into play once you're past FRA. If you're 62 1/2, for example, you can't request retroactive benefits dating back to age 62, even though you're allowed to file at that point.

COVID-19 has caused many seniors a world of financial harm. If you're one of them, think about the ways Social Security can help you through the pandemic, but also, consider the consequences involved. With any luck, you'll make a smart choice that alleviates some financial stress at a time when that's so important.

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