Social Security

Social Security Retirement Income Estimator

Everyone has heard of Social Security, but few are familiar with all of the inner workings of how the program works, how to make the correct claiming decision for yourself, or how spousal benefits work. I would be happy to discuss your particular situation with respect to Social Security with you but below is a general overview of the program.

One of the most important things that you can do to understand your situation better is to set up a “my Social Security” account online. The Social Security Administration used to mail annual benefit estimates but this has been reduced to every five years as a cost savings measure. However, your data is always available online after you set up your “my Social Security” account at this website: https://www.ssa.gov/myaccount/. The first thing that I would suggest that you do upon establishing your online account is to review your earnings history. Your Social Security benefit is directly tied to your lifetime earnings history and if there is an error it is up to YOU to have that brought to the attention of the SSA and have it corrected. An error in your earnings history, especially if earnings are totally missing for a given year, could significantly impact your benefit amount and therefore adversely impact your benefit, month after month for the rest of your life.

Once you have established your account online, you can then use the wide range of calculators that are available. The most accurate and informative for a beneficiary is “the Detailed Calculator” but there are a myriad of other calculators that cover other situations such as spousal benefits and determining your exact full retirement age, which is a function of your birth year. These calculators can be found here: https://www.ssa.gov/planners/calculators/

Your Social Security retirement benefit amount is a function of your Full Retirement Age (FRA). If you take benefits before your FRA, your monthly benefit will be reduced. Conversely, if you postpone receiving Social Security benefit, your benefit will increase. It’s popular to say that for every year you postpone Social Security that your benefit will increase by 8%. While this is true, it’s a bit more nuanced than that. Social Security benefit amounts actually increase by 2/3% for each month that you postpone receiving Social Security so over the course of a year your benefit would indeed by 8%. But what’s not terribly well known is that you do not have to wait a whole year to get a bump up in benefit. For example, if your FRA is 66 and at age 66 ½ you decide that you no longer want to wait to receive your benefit, you can claim at age 66 ½ and receive a 4% increase in monthly benefits relative to your age 66 benefit (2/3% per month x 6 months = 4%).