Written by:  Sarah Caine

When you think about retirement, Social Security is probably one of the first things that comes to mind.

Social Security is complicated. The Social Security Handbook has nearly 3,000 rules governing its benefits, and very few people can be an expert on all of them! However, the basics of Social Security retirement benefits can be broken down into fairly simple pieces.

First, you need to understand the following ages and terms:

    • Age 62: The earliest you can claim Social Security retirement benefits is at age 62. If you want to claim at this point, though, you will receive a reduced benefit. It is reduced because you will receive payments for a longer period of time. It will be reduced by a fraction of a percent for every month you have left before you reach your Full Retirement Age.
    • Full Retirement Age (FRA): This varies from age 65 to age 67, depending on your year of birth. If you delay claiming benefits until you reach your FRA, you will receive your full benefit.
    • Age 70: For every month you delay claiming benefits beyond your FRA, your benefit will increase. It will grow by a fraction of a percent for every month you delay after reaching your FRA. Your benefit can increase by as much as 8% each year. It will reach its maximum at age 70. Even if you work until age 75 or beyond, file for Social Security benefits at age 70.
    • Primary Insurance Amount (PIA): This is the benefit you will receive if you file for Social Security benefits at your Full Retirement Age. Your PIA is an important number to know because all early, delayed, or spousal benefits are calculated as a percentage of PIA.

Now, how does this all fit together? Using the guidelines above, a person with a Full Retirement Age of 66 and a Primary Insurance Amount of $1,000 per month could choose between the following:

Age Percentage Dollar Amount of Benefit
62 75% $750
66 (FRA) 100% $1,000 (PIA)
70 132% $1,320

As you can see, there’s a substantial increase with a delay.

Also please note: the ages I’ve listed above are not the only ages at which you can file for benefits. You can start at any age between 62 and 70, and the Social Security Administration will adjust your benefit, tailoring it to the exact month you start collecting.

Now, I’ve told you that your PIA is important, and you may be wondering: “How can I find out what mine is?” In the past, the Social Security Administration mailed an annual statement to everyone who was potentially eligible for benefits. These statements provided a lot of good information, including:

  • Estimates of your retirement, disability, and survivor benefits
  • Your earnings record
  • Estimates of the amount of Social Security and Medicare taxes you’ve paid into the system
  • General educational information

The Social Security Administration no longer mails out these statements. However, if you go online to their website and create an account, you can obtain a personalized statement quickly and easily.

We’ve covered some of the basics of Social Security retirement benefits: ages, terms, and how to find out what your benefits might be. Understanding how the Social Security system works can give you a good idea of what to expect when the time comes to apply for benefits.

I’ll be back soon with a follow up post on the best time to start collecting Social Security benefits. Until then, check out the Social Security Administration’s website for more information and contact your financial strategist with any questions.