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New Math for Social Security

In 2017, Americans born in 1955 become eligible to claim Social Security benefits at age 62. Claiming benefits before reaching full retirement age results in a permanently reduced benefit, so it requires careful consideration. But for those born in 1955 or later, the math for claiming at any age is different than it was for older age groups.

The shift dates back to the Social Security Amendments of 1983, which made numerous changes to strengthen the program fiscally, including a gradual increase in the full retirement age (FRA) from 65 to 67. The first phase of this increase resulted in a FRA of 66 for those born in 1946 to 1954. For those born in 1955, FRA is 66 and two months, with an additional two months added for each successive birth year until full retirement age reaches 67 for those born in 1960 or later (see chart).

Although some people may think this is unfair, average lifetime benefits should be similar for each age group due to increasing life expectancies and longer working careers.

Claiming Early or Late

The minimum and maximum claiming ages remain at 62 and 70, respectively. However, because Social Security benefit calculations are based on full retirement age, the change affects the benefits paid at all claiming ages before or after full retirement age.

For example, whereas someone born between 1946 and 1954 who filed at age 62 would have received 75% of the full benefit, someone born in 1955 would receive only 74.17% of the full benefit at age 62. This percentage will be reduced gradually until it reaches 70% for those born in 1960 or later.

Delayed retirement credits for working past full retirement age will remain the same, increasing the benefit by 8% each year. However, as FRA increases, the amount of time to earn credits will decrease. Someone with a full retirement age of 66 could earn four years of credits before claiming at age 70, and would potentially receive a benefit equivalent to 132% of the full benefit amount. However, someone born with a full retirement age of 67 would have only three years between FRA and age 70, so the maximum benefit would be 124% of the full benefit amount.

Social Security rules are complex, so be sure to research your options before making a decision on when to claim benefits. See https://www.ssa.gov for further information.

 
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