Out of the roughly 60 million Americans who currently receive Social Security, a huge proportion rely on the program for the majority of their income. Social Security is one of the biggest and most likely to have implications affecting the rest of your financial life.
One of the hardest-fought debates about Social Security centers on whether you 're better off claiming benefits earlier or later than you approach retirement. With the right to claim retirement benefits anytime between 62 and 70, there is a surprisingly wide set of possible outcomes. Below, we'll put hard numbers into the discussion about social security so you can make the most sense for you.
Social Security calculates about when you claim benefits
Social Security calculates your baseline benefit by looking at your earnings history over the course of a 35 year career. It takes each year's earnings, applies an inflation factor to make it comparable to current-year earnings, and then figures out the average monthly amount. If you haven't worked full years, then the calculations put in extra zeros in order to make the math work.
Social security takes your average indexed monthly earnings and runs through a formula. That gives you what is known as a primary insurance amount – and that amount, in turn, is what you will receive if you take your benefits at your full retirement age, which currently is between 66 and 67 years old depending on when you were Born
If you claim to have a full-time retirement age, then Social Security makes adjustments to that primary insurance amount. Specifically:
- If you claim early, then you will lose five-ninths of 1 percent of your primary insurance amount for each month before full retirement age, up to 36 months. If you claim 36 months early, you'll lose five-twelfths of 1 percent for each month above 36.
- If you claim after your full retirement age, you will have delayed retirement credits of two-thirds of 1 percent for every month you wait. The credits max out when you turn 70.
With all those fractions and percentages, it's no wonder that many people have a lot of trouble figuring out exactly how much filing early will cost them.
Social security recipient
Every year, Social Security comes out with statistics on its program, and one of the figures you can find is the average primary insurance amount for all retired workers. For the most recent year for which data is available, that figure was $ 1,422.
Based on that number, here's how much filing really costs the average Social Security recipient – or how much waiting can add to check amounts:  Amount matches matches matches matches matches matches matches matches matches matches matches matches matches matches matches matches matches matches matches and 7. 7. 7. 7. 7. 7. 7. matches then For instance, if you claim 12 months early, then you lose 12 times $ 7.90 or $ 94.80 per month, leaving you with about $ 1,327 for your monthly check.
right. But they should still give you a rough sense of the impact of filing early or late – and understand that the greater your benefit, the larger the increase will be in dollar terms.
Be smart about Social Security
Only you can decide whether to have more money later or less money earlier makes more financial sense from your own personal perspective. However, by having a better grasp of how much money you are talking about – rather than just generic percentage reductions and credits – you'll be smarter in assessing your options and making the best possible choice. insertScript ('facebook-jssdk', '//connect.facebook.net/en_US/sdk.js#xfbml=1&version=v2.3', true);
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