The Advantages of Deferring Social Security Retirement Benefits

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Under the Pennsylvania Workers' Compensation Act, once you begin collecting Social Security retirement benefits (but not disability benefits) the insurance company is entitled to reduce your workers' compensation benefits by an amount equal to one half of your net benefits.

Fortunately, there is a provision in the Social Security Act that gives anyone who wishes to collect Social Security retirements an incredible windfall if they defer receipt of benefits. If you defer receiving retirement benefits for four years after your full retirement date, you will receive an additional 32 percent in benefits, or 8 percent per year for each year you defer.  In a little over three years, you will get your money back and after that you will receive nearly one‑third more in retirement benefits. If you are receiving social security disability benefits, they are automatically converted to retirement benefits upon reaching full retirement age. You are entitled to defer receipt of retirement benefits at that time, but you will no longer receive disability benefits.

This makes particular sense for anybody who is collecting Pennsylvania workers' compensation benefits. The net effect of collecting Social Security retirement benefits at the full retirement age is to reduce drastically the workers' compensation benefits you are receiving.  At the same time, you will not get the benefit of an increase in your benefits of 8 percent per year. 

Unfortunately, however, in December 2015, Congress amended the Social Security Act to prevent someone from collecting a spousal benefit when the other spouse reaching full retirement age defers. Anyone considering deferral must calculate the full cost and benefit of the decision because you will not be entitled to get back the benefits you defer if you change your mind.

Feel free to call us if you have any questions.

 

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