Social Security benefits are a major source of retirement income for most people. The Social Security Administration (SSA) calculates your primary insurance amount (PIA), upon which your retirement benefit will be based, using a formula that considers your 35 highest earnings years. At your full retirement age, you'll be entitled to receive that amount. This is known as your full retirement benefit.
You can view your online Social Security Statement by creating an account at:
Retiring at full retirement age
Your full retirement age depends on the year in which you were born. If you retire at full retirement age, you'll receive an unreduced retirement benefit.
If you were born in:
Your full retirement age is:
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 or later
Claiming early will reduce your monthly benefit
You can begin receiving Social Security benefits before your full retirement age, as early as age 62. However, if you begin receiving benefits early, your Social Security benefit will be less than if you wait until your full retirement age to begin receiving benefits. Your retirement benefit will be reduced by 5/9ths of 1 percent for every month between your retirement date and your full retirement age, up to 36 months, then by 5/12ths of 1% thereafter. For example, if your full retirement age is 66, you'll receive about 25% less if you start benefits at age 62 than if you wait until your full retirement age (30% less if your full retirement age is 67). This reduction is permanent--you won't be eligible for a benefit increase once you reach full retirement age.
Delaying claiming will increase your monthly benefit
For each month that you delay receiving Social Security retirement benefits past your full retirement age, your benefit will permanently increase by a certain percentage, up to the maximum age of 70. For anyone born in 1943 or later, the monthly percentage is 2/3 of 1%, so the annual percentage is 8%. So, for example, if your full retirement age is 66 and you delay receiving benefits for 4 years, your benefit at age 70 will be 32% higher than at age 66.
Monthly benefit example
The following chart illustrates how much a monthly benefit of $1,800 taken at a full retirement age of 66 would be worth if taken earlier or later than full retirement age. For example, as this chart shows, this $1,800 benefit would be worth $1,350 if taken at age 62, and $2,376 if taken at age 70.
Claiming benefits early vs. late
Even though your monthly benefit will be smaller if you claim at 62, you might receive the same in total lifetime benefits as you would have had you waited until full retirement age, or age 70, to start collecting benefits. You will receive less per month, but you might receive benefits over a longer period, depending on your life expectancy.
Therefore, your optimal Social Security timing decision needs to include consideration of your marital status, age and earning differences between spouses, family history of longevity, and your current assets, among other factors.
If you’d like to know more about making the right Social Security decisions for your Retirement Income Plan, please contact a member of the HCM Wealth Advisory Team:
Mike Hengehold (Mike@hengeholdCapital.com)
Casey Boland (Casey@hengeholdCapital.com)
Jake Butcher (Jake@hengeholdCapital.com)
Jim Eutsler (Jim@hengeholdCapital.com)
Greg Middendorf (Greg@hengeholdCapital.com)
Steve Hengehold (Steve@hengeholdCapital.com)