Covisum Blog

Advisors often ask us about Social Security’s lump sum payment because they’ve read articles mentioning this option. These articles often use an example like this: someone files and suspends at 66 with the goal of waiting until 70 to build delayed retirement credits of 8% each year but then is diagnosed with a terminal illness at 68. The client could then request a lump sum payment to act as though he were receiving a benefit amount as early as when he first suspended. We’ve heard rumblings about using this as a potential tax strategy, potentially creating a year or two of completely tax-free income. These articles fail to mention the risks and how this option doesn’t always help when trying to maximize Social Security. Before you suggest a lump sum payment, keep these factors in mind: