WHAT IS SOCIAL SECURITY? 
Social Security was established in 1935 to alleviate poverty among the elderly during the Great Depression. It was created as a self-financing program that would collect payroll taxes from workers which would immediately be paid out in benefits to retirees.
Today, millions of Americans depend on Social Security. For many, it will be their primary source of retirement income. For others, it will be an important supplement to pensions and personal savings.
HOW DO YOU BECOME ELIGIBLE FOR SOCIAL SECURITY BENEFITS?
You become eligible for Social Security by working in a Social Security-covered job for at least 10 years. To be more precise, you need 40 credits. You can earn up to four credits in a year by earning a certain minimum dollar amount. If you earn four credits each year for 10 years, you accumulate the 40 credits necessary to be fully insured and achieve basic eligibility.
HOW IS YOUR RETIREMENT BENEFIT CALCULATED?
Did you know that the exact amount of your Social Security benefit is not computed until you turn 62? At that time, all your annual earnings are indexed to account for wage inflation.
Once each year's earnings are indexed for inflation, your highest 35 years of earnings are tallied. If you worked more than 35 years, only the highest 35 will count. If you worked less than 35 years, the missing years will count as zeroes. The 35 years of indexed earnings are totaled and divided by 420 (35 X 12 months) to arrive at your average indexed monthly earnings, or AIME. A three-part formula is then applied to the AIME to arrive at your primary insurance amount, or PIA.
WHEN MAY YOU BEGIN RECEIVING SOCIAL SECURITY BENEFITS?
Full retirement age for folks born between 1943 and 1954 is 66. This is the age at which you may begin receiving your full, unreduced PIA. Early eligibility begins at age 62. If you apply at this age, your benefit will be reduced.
The age at which you apply for Social Security benefits has a tremendous impact on your monthly income and the total amount of benefits you stand to receive over your lifetime. This is one of the most crucial aspects of Social Security Planning.
WHAT IF YOU APPLY BETWEEN THE AGES OF 62 AND 65?
If you apply for Social Security when you first become eligible at 62, your benefit will equal 75% of your PIA. So, for example, if your PIA is $2,466 and you apply for Social Security at age 62, your monthly benefit would be 75% of your PIA, or $1,849.50. This is the amount you would receive for the rest of your life, increased only by annual COLAs. This could have a huge effect on you depending on how long you actually live. If you take reduced benefits at 62, you will receive a lower monthly benefit for life. If you live longer than average, you will receive less in total benefits that if you'd waited until full retirement age (66) or even later to apply.
WHAT IF YOU APPLY BETWEEN THE AGES OF 66 AND 70?
At age 66, you attain full retirement age. Now you can start receiving your full, unreduced primary insurance amount (PIA). If you delay the onset of benefits past age 66, you will earn delayed credits. For each year you delay the start of benefits, your benefit will increase by 8% per year up to age 70, after which no further credits may be earned. So, in our previous example, if your PIA is $2,466, it will be increased by 32% to $3,255 (not including annual COLAs).
At the time of application, your delayed credits are calculated on a monthly basis. So you can apply anytime between your 66th and 70th birthdays and receive a prorated credit for the delay. Applying at age 70 earns you the most credit and results in the highest benefit.
SO HOW DO I SOLVE THE MYSTERY OF "WHEN IS THE BEST TIME FOR ME TO APPLY FOR SOCIAL SECURITY TO GET THE MOST BENEFITS?"
For many, this is a mystery and it is one of the most important questions facing Baby Boomers today. Your decision as to when to collect your benefits will depend on a lot of different factors, such as, your marital status, financial goals, or whether you will continue to work or not. And with approximately 567 different ways to claim your benefit and the over 100 million combinations of months for each of two spouses to take their retirement benefits, the answer as to when to start taking your benefit can certainly be a mystery. Without professional help, solving the mystery is next to impossible and unfortunately, there are no "Do-Overs" after one year.
At Bay State Insurance Agency Limited
we are ready to help you solve the Social Security Mystery.
And learn how a wise Social Security Strategy will help you
increase your Social Security Benefit for life.
Or give us a call at 410-758-1680
