Social Security Benefits and Filing Ages

 

You’ve probably noticed that your Social Security benefits statement has a section with estimated benefit amounts.  Most likely, for those born between 1943 and 1954, you’ll see an estimated payment amount at age 62, 66 and 70.  While it’s common knowledge that you’ll receive less at 62 than you would at 66…have you ever wondered how it’s calculated?    I think it’s important to know.  Understanding how Social Security benefits are impacted by filing early – or for filing later – is crucial when building a Social Security filing plan.

Transcript Follows:

Thank you for joining us for another edition of Social Security Intelligence.

You’ve probably noticed that your Social Security benefits statement has a section with estimated benefit amounts.  Most likely, for those born between 1943 and 1954, you’ll see an estimated payment amount at age 62, 66 and 70.  While it’s common knowledge that you’ll receive less at 62 than you would at 66…have you ever wondered how it’s calculated?    

I think it’s important to know.  Understanding how Social Security benefits are impacted by filing early – or for filing later – is crucial when building a Social Security filing plan.   

Let’s take a look

The full retirement age for those born between 1943 and 1954 is 66 years old.  At that age you are entitled to 100% of your primary insurance amount.  This is also known as your full retirement age benefit.   If you wait to file, you’ll receive a credit of 8% for every year you delay up until age 70.  The Social Security Administration refers to these increases as “delayed retirement credits.” 

On the other side, if you file early, your full retirement age benefit will be reduced.  How much it’s reduced all depends on your age when you file.  If you file at 65-one year early- you benefit would be reduced by almost 7%.  Those reductions continue to age 62 where your benefit would be only 75% of what you would receive at your full retirement age.

 

That’s a nice simplistic view of reductions for filing early and credit for filing later, but what about if you plan to file at 67 years and 8 months?  How do the credits- or reductions- break down on a monthly basis?

There are three separate calculation bands used to determine how much your benefit will increase or decrease on a monthly basis.  This calculation can be used even if your full retirement age is something other than 66 years old.

 The first band is full retirement age through age 70

Then there is a 36 month period prior to full retirement age.

And then there is anything more than 36 months prior to full retirement age

Let’s deal with the increase first.

For every month after full retirement age there is a 2/3 of 1% monthly increase.  That stops at age 70.

For the 36 months prior to Full retirement age there is a monthly reduction of 5/9 of 1%.

And for every month before the 36th  month, the reduction changes slightly to 5/12 of 1%.

I know all of that sounds really technical, but now I hope you have a greater understanding of how the Social Security Administration calculates the reductions or increases to your benefit.  Having a solid grasp on these numbers is the foundation of constructing your social security calculation.

If you need further help, don’t hesitate to call my office.

For more videos like this-and other great Social Security information- please browse our website at socialsecurityintelligence.com.  While you’re there, you can schedule a free consultation.  Just click on the icon and the rest is easy.  For a daily dose of Social Security Intelligence, find us on Facebook and like our page. 

 

Thanks again for watching.

 

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