Understanding Your Social Security Retirement Benefits, Including When to Start Receiving Them
Edward A. Zurndorfer
The earliest age an individual can receive monthly Social Security retirement benefits is age 62. However, if an individual elects to receive his or her benefit before his or her full retirement age (FRA), the retirement benefit will be reduced for each month before his or her FRA the individual starts receiving the retirement benefit. FRA depends on which year an individual was born, and is summarized in the following table:
Full Retirement Age (FRA) by Year of Birth
| YEAR OF BIRTH | FULL RETIREMENT AGE |
| 1937 or earlier | 65 |
| 1938 | 65 and 2 months |
| 1939 | 65 and 4 months |
| 1940 | 65 and 6 months |
| 1941 | 65 and 8 months |
| 1942 | 65 and 10 months |
| 1943 – 1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 | 67 |
*Source: www.socialsecurity.gov
The reduction is a permanent reduction and continues even after the individual reaches his or her FRA.
An individual who starts receiving a Social Security retirement at his or her FRA will receive his or her full benefit amount. Individuals who choose to delay receiving their Social Security retirement benefit beyond their FRA may be eligible for delayed retirement credits, which permanently increases an individual’s Social Security retirement benefit.
Before discussing when an individual should elect to start receiving his or her Social Security retirement benefit, it is important to review some of the basics of Social Security retirement benefits and in particular how Federal employees qualify for benefits.
To qualify for a Social Security retirement benefit, an individual must be “fully insured”. An insured status is acquired by earning “credits,” based on the wages or self-employment income earned during a calendar year. In 2020, an individual must earn $1,410 in Social Security-covered employment (for example, a federal employee covered by FERS) in order to earn one credit and earn $5,640 to earn the maximum of four credits for the year. An individual generally becomes “fully insured” by earning 40 credits of Social Security, typically by working 10 years in Social Security-covered employment.
In general, a fully insured individual’s Social Security retirement benefit, and those of his or her family members (which will be discussed in the next FEDZONE column) are based on the individual’s Social Security earnings record. The earnings taken into account are reported on an individual’s W-2 (Box 3 -Social Security wages) to the Social Security Administration (SSA) each year by the individual’s employer, up to a certain maximum known as the “wage base.”
The wage base is indexed for inflation each year and effectively places a cap on the amount of Social Security benefits a worker can receive, regardless of earnings. The wage base for 2020 is $137,700 while the wage base for 2019 was $132,900.
Using an individual’s Social Security-covered earnings record, the SSA calculates a number known as the Primary Insurance Amount, or PIA. The PIA is the basic value used to determine the dollar amount of benefits available to an individual and his or her family.
Fully insured individuals can take their monthly retirement benefits, also called “old-age insurance” benefits, when they are age 62 or older and have filed an application for those benefits. But by starting to receive the retirement benefit sometime before the month a fully insured individual becomes FRA, the benefit will be permanently reduced. The amount of the reduction is presented in a table below.
If a fully insured individual waits until his or her FRA to start receiving his or her retirement benefit, then the full retirement benefit will be paid.
If a fully insured individual elects not to start receiving his or her Social Security retirement benefit at his or her FRA or early, but rather delays the start of the benefit, then delayed retirement credits will permanently increase the retirement benefit. Delayed retirement credit (DRC) increases apply for benefits for each month an individual is older than FRA but younger than the month he or she turns age 70. An “increment month” is any month an individual is eligible, but did not receive a retirement benefit.
The DRC amount is based on increment months which may increase an individual’s retirement by varying amounts, depending on when he or she reaches FRA.
The per month reductions (by percentage) of Social Security retirement benefits that are started before one’s FRA, and the annual DRC increases (by percentage) are summarized in the following table:
| Year of Birth* | Year Individual Turns 62 | Full Retirement Age (FRA) | Per Month Reduction If Benefits Begin Prior to FRA | Age 62 Benefits as % of FRA Benefits | Per Year Delayed Retirement Credits | Age 70 Benefits as % of FRA Benefits |
| 1936 or prior | 1998 or prior | 65 | 5/9% | 80% | 6% | 130% |
| 1937 | 1999 | 65 | 5/9% | 80% | 6½% | 132 ½% |
| 1938 | 2000 | 65 and 2 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 79 1/6% | 6½% | 131 5/12% |
| 1939 | 2001 | 65 and 4 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 78 1/3% | 7% | 132 2/3% |
| 1940 | 2002 | 65 and 6 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 77 ½% | 7% | 131 ½% |
| 1941 | 2003 | 65 and 8 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 76 2/3% | 7½% | 132 ½% |
| 1942 | 2004 | 65 and 10 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 75 5/6% | 7½% | 131 ¼% |
| 1943–54 | 2005–16 | 66 | 5/9% for 36 mos. + 5/12%/mo.** | 75% | 8% | 132% |
| 1955 | 2017 | 66 and 2 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 74 1/6% | 8% | 130 2/3% |
| 1956 | 2018 | 66 and 4 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 73 1/3% | 8% | 129 1/3% |
| 1957 | 2019 | 66 and 6 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 72 ½% | 8% | 128% |
| 1958 | 2020 | 66 and 8 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 71 2/3% | 8% | 126 2/3% |
| 1959 | 2021 | 66 and 10 mos. | 5/9% for 36 mos. + 5/12%/mo.** | 70 5/6% | 8% | 125 1/3% |
| 1960 or later | 2022 or later | 67 | 5/9% for 36 mos. + 5/12%/mo.** | 70% | 8% | 124% |
*Source: www.socialsecurity.gov
The following is a sample of an individual’s overall Social Security benefits (retirement, family, disability and survivors) as computed by the SSA for each working individual each year. Individuals can set up their own SSA account by going to www.socialsecurity.gov/myaccount. In so doing, an individual can download and view his or her overall Social Security benefits (in today’s dollars) at any time.
| Your Estimated Benefits |
| Based on turning age 62 in 2020 |
| *Retirement | You have earned enough credits to qualify for benefits. At your current earnings rate, if you stop working and start receiving benefits… At age 62, your payment would be about………………………………………………………………..$962 a month If you continue working until FRA (66 years and 8 months), your payment would be about…………………………………………………………….$1,343 a month At age 70, your payment would be about…..$1,701 a month |
| *Disability | You have earned enough credits to qualify for benefits. If you became disabled right now, Your payment would be about……………………………………………………………$1,248 a month |
| *Family | If you get retirement or disability benefits, your spouse and children also may qualify for benefits. You have earned enough credits for your family to receive survivors’ benefits. If you die this year, certain members of your family may qualify for the following benefits. |
| *Survivors | Your child…………………………………………………….$1,007 a month Your spouse who is caring for your child… $1,007 a month Your spouse, if benefits start at FRA…………. $1,343 a month Total family benefits cannot be more than $2,014 a month Your spouse or minor child may be eligible for a special one-time death benefit of $255. |
The question of when (that is, at what age) an individual should start receiving his or her Social Security retirement benefit has been asked an immeasurable number of times. Unfortunately, there is in reality no one answer to this question that applies to every individual. Some of the issues that are relevant to answering the questions: (1)Does the individual need the Social Security income to help pay his or her bills? (2) Is the individual married and if so, are half of the spouse’s Social Security retirement benefit more than the individual’s Social Security retirement benefit? (3) Would any family member (spouse, children under the age of 18) benefit by the individuals starting to receive the benefit? (family Social Security benefits will be discussed in a subsequent column); (4) Is the individual under FRA and still working? Those individuals under FRA and still working may have their Social Security benefits reduced – perhaps entirely- if their salary/wages are too high; and (5) How is the individual’s health? If an individual in his or her early 60’s and not in the best of health, it probably does not make sense to delay the start of one’s Social Security retirement benefit.
The following examples illustrate the difference between electing permanently reduced retirement benefits at age 62 or waiting until one’s FRA or until age 70. For each illustration, the examples do not project any future cost-of-living allowances (COLAs).
The first two examples: Start receiving Social Security benefits at age 62 or at FRA?
Example 1 – FRA 66 (born 1943-1954)
Primary Insurance Amount $1,500
Monthly benefit at FRA $1,500
Monthly benefit at age 62 $1,125
(48 months before FRA; 25 percent reduction)
$1,125/month x 48 months = $54,000
(initial advantage of starting benefit at age 62)
$54,000/*$375 = 144 months or 12 years
(*permanent reduction by starting benefit at age 62)
The initial advantage continues until age 78 (66 + 12 years), which is the breakeven age for total lifetime benefits. In other words, if the individual starts receiving the benefit at age 62 but dies before age 78, then the individual comes out ahead. If the individual dies after age 78, then the individual made the wrong decision to start receiving his or her Social Security benefit at age 62.
Example 2 – FRA 67 (born after 1959)
Primary Insurance Amount $1,500
Monthly benefit at FRA $1,500
Monthly benefit at age 62 $1,050
(60 months before FRA; 30 percent reduction)
$1,050/month x 60 months = $63,000
(initial advantage of starting benefit at age 62)
$63,000/*$450 = 140 months or 11 years and 8 months
(*permanent reduction by starting benefit at age 62)
The initial advantage continues until age 78 and 8 months (67 + 11 years and 8 months) which is the break-even age for total lifetime benefits. In other words, if the individual starts receiving the benefit at age 62 but dies before age 78 years and 8 months, then the individual comes out ahead. If the individual dies after age 78 years and 8 months, then the individual made the wrong decision to start receiving his or her Social Security benefit at age 62.
Next two examples: Start taking Social Security benefits at FRA or wait until age 70?
Example 1- FRA 66 (born 1943-1954)
Monthly benefit at FRA $2,861
Month benefit at age 70 $3,776
(4 years x 8 percent/year DRC =32 percent increase of $915)
$2,861/month x 48 months = $137,328 accrued benefits at age 70
$137,328/$915 = 150 months = 12.5 years
The initial advantage of starting to take Social Security benefits at age 66 stops at age 70 plus 12.5 years, or 82.5 years. If the individual lives to at least age 82.5, then the decision to start receiving retirement benefits at age 70 was the correct decision.
“Breakeven” age is age 82.5
Example 2 – FRA 67 (born after 1959)
Monthly benefit at FRA $2,861
Monthly benefit at age 70 $3,548
(3 years x 8 months/year DRC = 24 percent increase of $687)
$2,861/months x 36 months = $102,996 accrued benefits at age 70
$102,996/$687 = 150 months = 12.5 years
The initial advantage of starting to take Social Security benefits at age 67 stops at age 70 plus 12.5 years, or 82.5 years. Same conclusion as above.
“Breakeven” age is age 82.5
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