Social Security Benefits

Social Security Retirement Benefits

Seniors can choose to collect full retirement benefits, reduced benefits at an early age, or delayed benefits for late retirement. This decision will affect the amount of the benefit, as well as the date when payments begin.

Benefit Levels

Full Retirement Benefits

Beneficiaries begin receiving full benefit payments once they reach the legally defined “full” retirement age. Historically, the full retirement age has been 65. However, beginning in 2000, the age at which full benefits could be collected started to gradually increase by increments of two months a year. This continued until 2005, when the full retirement became age 66. Then, in 2017, the age for full retirement gradually increases again in two months increments for each year until year 2022, at which point, full retirement will be defined as age 67.

Given these ongoing changes, individuals approaching retirement should confirm the exact age at which they qualify for full benefits. It is important that you understand that eligibility for Medicare remains at age 65.

Social Security Full Retirement and Reductions by Age   

Year of Birth

Full Retirement Age

Age 62 Reduction Months

Monthly % Reduction*

Total % Reduction

Monthly % Reduction(Spouse**)

Total % Reduction*(Spouse)

1937 or earlier








65 and 2 months







65 and 4 months







65 and 6 months







65 and 8 months







65 and 10 months














66 and 2 months







66 and 4 months







66 and 6 months







66 and 8 months







66 and 10 months






1960 and later







Reduced Retirement Benefits

Beneficiaries can elect to receive reduced payments as early as age 62. Benefits are decreased by five-ninths of a percent for each month before the full retirement age. For example, if someone who would have received their full retirement benefits at age 65 decided to start those benefits early at age 62, the payment would be 9- percent of what it would have been at 65. As Social Security’s full retirement age is now increasing toward 67, the percentage of benefits received for selecting early retirement will gradually decrease from 80 percent to 70 percent.The trade-off in electing early benefits is that payments are permanently reduced. However, the beneficiary receives checks for a longer period of time. According to SSA, as a general rule, early retirement gives beneficiaries about the same total Social Security benefits over their lifetimes. However, each person’s situation is different, so as people make decisions about their income level in retirement they should choose carefully before deciding to receive early benefits.For people leaving the workforce before attaining full retirement age it may be sensible to take early Social Security benefits – especially if those benefits are necessary for current living expenses. Payment will be partially tax-free, and taking early retirement may enable a beneficiary to delay withdrawals from individual retirement accounts (IRAs) and employer-provided retirement programs that accumulate on a tax-deferred basis.The Cost of Waiting below shows a hypothetical situation in which waiting until age 65 to take Social Security benefits means the beneficiary will pass up $ 40,032 in payments, which will take 12 years to recoup. If the benefit is not needed at age 62, one option is to take early retirement and invest the payments to make up for the $ 278 per month difference between early and full retirement benefits.

The Cost of Waiting

Monthly benefit at age 62: $1,112

Monthly benefit at age 65: $ 1,390

Monthly difference: $ 278

Annual difference: $3,336

Cost of Waiting until age 65: $40,032 ($1,112 x 12 x 3)

Delayed Retirement Benefits

For healthy senior’s not needing Social Security payments for current living expenses, an argument can be made for delaying benefits to receive larger payments. Seniors, who delay their Social Security benefits past age 65, receive increased payments. The increase stops at age 70, even if seniors continue to delay taking benefits.

The decision to delay Social Security retirement benefits may be influenced by a number of factors. For example, employment income may be adequate and the payment will be higher when it is needed most. Further, delaying benefits can lower federal income taxes. Delaying benefits will also increase payments to widows or widowers.

Increase for Delayed Retirement

Year of Birth

Yearly Rate of Increase

Monthly Rate of Increase


4.5 %

3/8 of 1 %


5.0 %

5/12 of 1 %


5.5 %

11/24 of 1 %


6.0 %

½ of 1 %


6.5 %

13/24 of 1 %


7.0 %

7/12 of 1 %


7.5 %

5/8 of 1 %

1943 and later

8.0 %

2/3 of 1 %

 Estimating Benefits

Beginning in October 2000, the Social Security Administration began sending out yearly Social Security statements. The agency mails statements to workers age 25 and older three months before their birthday. The statements allows workers to review their actual earnings record, see estimates of future benefits, and see a breakout of the benefits they might receive under various components of the Social Security program (Retirement, Disability, Family, Survivors, and Medicare). It also shows the difference in benefit amounts received at age 62, at full retirement age, and at age 70.

You can help your clients estimate Social Security benefits through SSA’s internet page Beneficiaries can request a statement by calling Social Security and asking for a form SSA-7004, Request for Earnings and Benefit Estimate Statement, or by downloading the form from

Calculating Benefits

Social Security benefits are based on such factors as the recipient’s date of birth, earnings, and type of benefit. The calculation is based on the highest 35 years of earnings in a person’s entire working career. If the worker has less than 35 years of wages, zeroes are added for missing years. These earnings are adjusted to allow for changes in wage levels over the years.

Social Security applies a formula to these earnings and arrives at a basic benefit, called the primary insurance amount (PIA). This is the amount the beneficiary would receive at the full retirement age.

Social Security’s benefit formula is designed to give a higher percentage of earnings to lower wage earners. For example, in 2009 Social Security will pay 90 percent of the first $ 744 and $4,483 in average monthly earnings PLUS 15 percent of any amount above that (these amounts are expected to change in 2010 and beyond). Thus, a retiree with an average monthly earning of $ 744 receives a Social Security benefit equal to 90 percent of that amount, or $ 699.60. Conversely, a retiree with an average monthly income of $ 5,000 receives $1,600, which is 32 percent of the average monthly earnings. While the percentages in this formula (90 percent, 32 percent, and 15 percent) do not change, the higher average monthly earnings produce a smaller replacement percentage due to the tiered formula.

SSA establishes minimum and maximum benefits for individuals and families. Everyone who qualifies for Social Security receives a minimum benefit. Individuals with very low Social Security benefits may also qualify for Supplemental Security Income (SSI).

Benefit Adjustments

Cost of Living Adjustment (COLA)

Seniors receive an automatic cost-of-living adjustment (COLA) on January 1 every year. COLAs help prevent inflation from eroding Social Security benefits. For example, Social Security benefits increased by 5.8 percent in 2009.

The Social Security Act specifies a formula for determining the COLA. In general, the COLA is equal to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next.

Reduction of Benefits Due to Earnings

Seniors who continue working while drawing Social Security benefits before their full retirement age may experience a reduction in their benefits due to a limitation on earnings for employment.

  • The earnings limitation is adjusted annually. For 2009, the limit is $ 14,160 (check the Social Security web site for annual adjustments in the limit).
  • For beneficiaries under their full retirement age, $ 1 dollar in benefits is deducted for every $ 2 in earnings above $14,160.
  • For the year in which the beneficiary reaches full retirement age, $ 1 in benefits is deducted for each $ 3 in earnings above $ 37,680 (2009 limit) but only counting earnings before the month they reach the full retirement age.
  • Starting with the month the beneficiary reaches full retirement age, there is no limit on earnings.

These rules became effective in January 2000.

If a senior earns more than the earnings limitation, Social Security reduces payments to the retire worker and family members receiving benefits on his or her work record. If a family member earns more than this limit, only that individual’s benefits are affected.

Retirement Benefits for Families

Family members of a retired worker eligible for Social Security may also qualify for monthly benefits. Eligible family members may include a spouse, dependent children, dependent parents, or a divorced spouse. The benefit level for a family member can be as much as 50 percent of the retired worker’s rate. The maximum family benefit varies from approximately 150 to 180 percent of the retiree’s benefit rate. If benefits of eligible family members exceed the family maximum, all family members will receive proportionally reduced rates; however, the retiree’s benefits will not be reduced. Benefits paid to a surviving divorced spouse to do not affect the benefit rates for other survivors.

Retirees may be eligible for benefits on their own work record or that of a current spouse, or if divorced, a previous spouse. Beneficiaries will receive the higher of 100 percent of the benefit calculated under their own record or 50 percent of the benefit calculated on a spouse’s record. Here are some examples:

Example 1:

If a wife has $1,000 benefit and a husband an $800 benefit, the household benefit will be $1,800 per month. The rationale is that the husband’s benefit on his own record is greater than 50 percent of his spouse’s benefit so that both receive 100 percent of their own benefits. Whenever a death occurs, the surviving spouse receives the higher of the two benefits. In our example, the household benefit would be $1,000 regardless of whether the husband or wife died. If the surviving spouse is over age 60 and remarries, the spouse retains this survivor benefit.

Example 2:

If a wife has a $1,000 benefit and a husband has a $450 benefit, the household benefit will be $1,500 per month. The rationale is that the husband’s benefit on his own record is less than 50 percent of his spouse’s benefit so that he is entitled to receive $ 500 per month based upon his spouse’s record. If his spouse dies, he will receive $1,000 as the higher of her benefit or his, making the household income $1,000.

Retirement Benefits for Survivors

Monthly survivor benefits can be paid to relatives of a retire worker eligible for Social Security benefits after the worker’s death. As with family benefits, eligible family members may include a spouse, dependent children, dependent parents, or a divorced spouse. The benefit level for survivors varies from 75 to 100 percent of the deceased’s basic Social Security benefit. The maximum family benefit varies between 150 to 180 percent of the deceased’s benefit rate.

Benefits paid to a surviving divorced spouse age 60 or older (or age 50 to 60 if disabled) do not affect the benefit rates for other survivors. In addition to the monthly benefits, there is also a one-time death benefit that can be made to a spouse or minor children meeting qualifying criteria. Currently, this payment is $ 255.

Worker’s Death after Retirement

At the time of a retired worker’s death, the spouse’s retirement benefit (typically 50 percent of the PIA) is automatically converted to a widow’s or widower’s benefit, which operates at 100 percent of PIA, presuming he or she is at least age 65. Benefits will be reduced for younger spouses or offsets are made to the widow’s or widower’s own retirement benefits.

The Windfall Elimination Provision

For Social Security recipients who work for an employer who doesn’t withhold Social Security taxes, such as a government agency or an employer in another country, the pension they get based on that work may reduce their Social Security benefits.

The benefit can be reduced in one of two ways. One is the government pension offset and applies to those who receive a government pension and are eligible for Social Security benefits as a spouse, widow, or widower.

The other way – the windfall elimination provision – affects how retirement or disability benefits are figured if a recipient receives a pension from work not covered by Social Security. The formula used to figure the benefit is modified, resulting in a lower amount.

The information above is reprinted from Working with Seniors: Health, Financial and Social Issues with permission from Society of Certified Senior Advisors® . Copyright © 2009. All rights reserved.