Clients Waiting Until 70 to Claim Social Security? 3 Bits of Friendly Advice

Starting Social Security any time after age 65 kickstarts a 6-month retroactive period (but starts no earlier than their 65th birthday month). Unbeknownst to clients, Medicare Part A hospitalization insurance automatically comes connected to Social Security benefits. However, Part A started behind the scenes six months prior to the application date. 

That means Part A started seven or eight months prior to turning 70.

There is nothing a client needs to do about this retroactive starting date unless they have been contributing to a health savings account. In that case, you should advise them to stop contributions and inform their employer about nine months before reaching 70.

Tip #3: Set expectations for smaller benefit payments.

Clients who have waited until 70 to claim know how significant their benefit payment will be. Instead of, say, $3,000 per month, they may instead get about $4,000 per month between delayed retirement credits and COLAs. But that’s only on paper.

Depending on each client’s overall financial picture, there can be reductions for:

Medicare Part B premiums. Once both Social Security and Part B are turned on, Part B premiums are automatically deducted from Social Security before arriving in their bank account. The same goes for the income-related monthly adjustment amount (IRMAA) if your client’s income is high enough.
WEP or GPO. Clients who are also eligible for a state or local pension from jobs that did not pay FICA taxes, may see reduced benefits due to the Windfall Elimination Provision or Government Pension Offset. Pensions get paid first and in full; Social Security gets reduced in most cases.
Voluntary tax withholding. A majority of clients will likely need to include up to 85% of their Social Security benefits as taxable income. They may find it helpful to voluntarily withhold a portion for taxes. 

Congratulations are in order.

Clients who have been able to wait until 70 before claiming have made a strong, strategic decision for their future retirement income. Kudos to them. Just remember to help them connect the hidden dots. It seems there is always more than meets the eye when it comes to Social Security.