SOCIAL SECURITY INFORMATION
by Edward D. Collins

You can start collecting Social Security when you turn 62 years old.

The amount you receive each month is based upon your top 35 years of lifetime indexed earnings.   (Indexed earnings... the amount is adjusted for inflation.)

You need to work at least 10 years (40 credits) to qualify for Social Security benefits.

If you decide to start receiving benefits at age 62, the amount you receive will be reduced by 30% from the amount you would receive at your FRA... or Full Retirement Age.  (For those of us born in the year 1960 or later, our FRA is age 67.   Throughout this document, I will assume your Full Retirement Age is also 67.)

As an example, if your FRA monthly benefit amount is \$1,000 and you choose to collect at age 62, your monthly benefit amount will be reduced to \$700.   \$1,000 x (1 - .30) = \$700

It's interesting to note if you wait until age 67 to collect, the monthly amount you will receive is 42.86% more than the amount you would have received at age 62!

To clarify, \$1,000 is 42.86% more than \$700.   (\$1,000 - \$700) / \$700  = .42857

So yes, both statements are true.  When you mention a reduction in benefits from FRA, 30% is the correct figure to quote.  When you mention an increase from your age 62 benefit, 42.86% is the correct figure to quote.

Edit:  HA!  Just for fun, I asked ChatGPT the following question:  What percentage increase will I receive if I decide to collect social security at age 67 rather than age 62?

I actually didn't expect to see the proper percentage in the answer.  Usually websites that describe and talk about Social Security benefits at various ages will quote the reduction amount from FRA, the 30% reduction.

However, I was pleasantly surprised to see this in the response box:

For every month that you delay in filing, your benefits are increased by a specific percentage.  This percentage increases each and every month until you reach age 70.   You can file for Social Security any month you choose, after age 62.

Between the ages of 62 and 64, the monthly increase in benefits is 5/12 of 1%, or .0041667.  This percentage increases slightly from age 64 to age 67 your Full Retirement Age, with a monthly increase of 5/9 of 1% or .0055556.

From age 67, if you continue to delay filing, your monthly benefit amount is now increased even more, to .0066667 each month.  After 12 months, this is a total increase of 8%.  (.00667 x 12 = .08)

After two full years, at age 69, this monthly benefit increase will result in a percentage that is exactly 16% more than your FRA amount.  By age 70 it will be a full 24%.  (.00666667 x 36 months = 24%)

At the bottom of this page, there is a chart which lists the percentage of FRA amount you will receive at every month, from 62 up to age 70.

EARNINGS LIMIT

If you are younger than full retirement age and earn more than the yearly earnings limit, your benefit amount will be reduced.  The limit only applies if you claim Social Security before reaching your full retirement age.

If you are under full retirement age for the entire year, \$1 will be deducted from your benefit payments for every \$2 you earn above the annual limit. For 2024, that limit is \$22,320.

In the year you reach full retirement age, \$1 will be deducted in benefits for every \$3 you earn above a different limit. In 2024, this limit on your earnings is \$59,520.  The Social Security Office will only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year.

However, you get this reduction back... eventually.  You don't get it back in a tidy sum, all at once.  (Too easy that way, right?)  What Social Security does instead is increase your benefit when you reach full retirement age to account for the previous withholding.

BREAK-EVEN AGE

Your break-even age is the age at which point you'd will are now about come out ahead by delaying Social Security benefits.

Everyone's SS break-even age is the same... it is not based upon each person's individual income or benefit amount. It's a simple formula.  The formula is this:

# of months until break-even = # of months difference between the two ages x (1 - the early retirement age reduction amount) / percent of PIA relative to the early retirement age.

(PIA  = Primary Index Amount, aka, the amount you will earn at age 67, FRA.)

A few examples should help clarify.

Let's assume you wanted to know what the break-even age is between filing at age 62 and filing at age 67:

# of months difference between the two ages is 60.  ((67 - 62) x 12 = 60 months)
1 minus the SS reduction amount if you collect at age 62 is 70%. (1 - .30 reduction = .70)
Percent of PIA relative to the early retirement age is 30% (30% reduction + 0% "bonus")
60 x .70 / .30 = 140 months until break-even age
140 months / 12 months per year = 11.67 years.  From age 67 that would be 78 & 8 months.

To clarify, at the age of 78 & 8 months, a person who decided to wait and collect SS at age 67, would now have received exactly the same amount of benefits as a person who chose to collect at age 62.

You can verify this with actual figures.  For example, let's again assume a person chose to collect at age 67 and received \$1,000 each month.  After 140 months their total benefits received would be \$140,000.  The person who collected early at age 62 received benefits for an additonal five years, or 200 months... but each benefit check was only \$700.  \$700 x 200 months = \$140,000, the exact same amount.

Here's another example.  Let's say you wanted to know what the break-even point is from age 62 to 70:

# of months difference between the two ages is 96. ((70 - 62) x 12 = 96 months)
1 minus the SS reduction amount if you collect at age 62 is 70%. (1 - .30 = .70)
Percent of PIA relative to the early retirement age is 54% (30% reduction + 24% "bonus" for waiting 3 years to collect)
96 x .70 / .54 = 124.44 months until break-even age
124.44 months / 12 months per year = 10.37 years. From age 70 that's age 80 & about 4.5 months.

To clarify, at the age of 80 & 4.5 months, a person who decided to wait and collect SS at age 70, would now have received exactly the same amount of benefits as a person who chose to collect at age 62.

Again, let's verify it.  Starting at age 70, 124 months x \$1,240 (\$1,000 per month + \$240 percentage increase for waiting until age 70 = \$1,240) = \$153,760.   The person who chose to collect at age 62 collected \$154,000 during that same time span.  (124 months + 96 additional months, from age 62 to 80... 8 x 12)  After next month, the person who waiting until age 70 collect will now receive more.

Here's a final example.  Let's say you wanted to know what the break-even point is from age 67 to 70:

# of months difference between the two ages is 36. ((70 - 67) x 12 = 36 months)
1 minus the SS reduction amount if you collect at age 67 is 100%. (1 - 0 = 1)
Percent of PIA relative to the early retirement age is 24%. (0% reduction + 24% "bonus")
36 x 100 / .24 = 150 months until break-even age
150 months / 12 months per year = 12.5 years.  From age 70 that would be age 82 & 6 months.

To clarify, at the age of 82 & 6 months, a person who decided to wait and collect SS at age 70, would now have received exactly the same amount of benefits as a person who chose to collect at age 67.  (If that seems like a long time, note that just after six and a half years, you've already received nearly 85% of the amount the person collected who began receiving benefits at 67.  More on this below, in the WHEN SHOULD I FILE section.)

In online forurms I often read from members who chose to file at age 62 because they "did the math" and they would have been 85 years old before the reached their break-even age.  (One member mentioned 87 and another member mentioned 92!)  That's not correct at all.  They didn't calculate the break-even age correctly.  Again, it makes no difference the amount of your benefit, which is different for everyone.  The break-even point is the same.

Here's another formula to use, to determine the break-even point between any two years, by using the two benefit amounts.

# of months until break-even = (age then - age now) x 12 months x ss amount at early age / difference in two amounts

For example, using the same figures as earlier (\$1,000 as the PIA at age 67 and \$700 as the amount received at age 62) the numbers would look like this:

# of months to break-even = (67 - 62) x 12 x 700 / 300

5 x 12 x 700 / 300 = 140 months... the same answer arrived at earlier.  140 months from age 67 is age 78 & 8 months.

Or course, you don't need a formula at all.  Another method to determine that break-even point is to keep track of the accumulated total using any spreadsheet.  In the graphic below, Column A's total is increased each month by \$700.  Column B's accumulated total is increased each month by \$1,000.  (Be sure to start Column B's total five years after Column A.)  After 140 months of benefits in Column B, the two accumulated amounts are now identical.  (After that, Column B's total will always be greater, of course.)

As soon as you reach the break-even age, your total benefits received whether you filed early or late... are always equal.   That's what the break-even age is.  If you claimed your SS benefits early, you received more checks... but each check was a bit less than the person who delayed in filing.  The person who delayed in filing received fewer checks..., but each check was a bit larger.  But for both individuals, the total amount receives is the same.

COLA

The purpose of the cost-of-living adjustment (COLA) is to ensure that the purchasing power of Social Security benefits and SSI payments is not eroded by inflation.

Please note that all of the break-even points, for any two years, is not dependant on your benefit amount or on COLA.

Below is a list of the past ten years of COLA increases:

 Year SS COLA Percentage Increase 2014 1.7 2015 0.0 2016 0.3 2017 2.0 2018 2.8 2019 1.6 2020 1.3 2021 5.9 2022 8.7 2023 3.2 Average 2.75

 ACTUARIAL LIFE TABLE Actuarial tables (also called life expectancy tables, mortality tables,and life tables) are statistical tools used by companies, scientists, courts, and government agencies to predict the life expectancy of a person by their age, gender, and other factors.  A small portion of the actuarial table found on the ssa website is displayed below. The average 62-year-old male will live another 19 years.  The average 62-year-old female will live another 22 years.According to the SOA, a non-smoking, 65-year-old male in excellent health today has a 43% probability of living to age 90, and a similar 65-year-old female has a 54% probability of living to 90.  One-third of today’s 65-year-old women in excellent health and about one in four men are expected to be alive at 95.You may have read that the current life expectancy is around 76 years old, and if so, there's no reason to wait to claim benefits if the break-even age is near age 79.  Uh... no.  That life expentancy age of 76 is for someone who is born today.  For someone who has already reached the age of 62, they can now expect to live longer than age 76.
 Average Number of Years of Life Remaining Age Male Female 62 19 22.07 63 18.31 21.29 64 17.63 20.52 65 16.95 19.75 66 16.29 18.99 67 15.63 18.23 68 14.98 17.48 69 14.33 16.74 70 13.69 16