How Does Applying at Certain Ages Affect My Benefit?

The first two installments of this series covered the basics of retirement benefits and who is entitled to receive payments. This leads us to discuss the consequences of applying at different ages and what affect that has on the amount of your monthly SS payment.

From the information in the first installment, you know the different ages at which you are eligible to apply for SS benefits. Your monthly benefit is determined based on your full retirement age (FRA). If you file early, you face a reduction in benefits of 70-75% depending on your year of birth. On the other hand, if you defer until the age of 70, you can receive payments of 130-132% of your FRA benefit. Keep in mind that you can apply for SS at any age after 62, but there is no benefit of delaying past age 70. Your benefits will be adjusted based on how close you are to the FRA on either side.

Another item to consider is if you plan on actually retiring or if you still plan to work. For those who want to continue working AND receive SS benefits, there is an earnings limit to contend with. If you have not reached your FRA, you can only earn $14,160 ($14,640 in 2012) a year to avoid a reduction in benefits. The reduction is $1 of benefit for every $2 your earnings exceed the limit. Once you reach your FRA, you can make up to $37,680 ($38,880 in 2012) in the year of turning 66 before a reduction occurs. The good news is that there is no limit on earnings after reaching FRA.

Because Social Security is an intricate system, it has taken three entries to cover the basics of who is eligible and how benefits are determined. Our final blog will answer the most important question – “When should I begin taking Social Security?”