Figuring out Social Security

The Joy Compass 12 Steps to Successful Retirement Series has been developed for Let's Talk Money! Sirius XM Channel 141.

Step 2. Figuring out Social Security helps you:
▪ Estimate the income you will receive;
▪ Navigate important decisions around early, normal or delayed retirement;
▪ Avoid a trip to the office and apply online;
▪ Prevent a big Medicare mistake; and more.


1. Estimate your social security
It is important to know how much you expect to receive in social security benefits.
• Since Social Security is around 40% of retirement income for an average American,  become        knowledgeable about this portion of your income in retirement. Certainty contributes to your peace of mind, and studies show 80% of Americans worry about income in retirement.

You can now estimate your Social Security payments at Input your name, date of birth, Social Security number, place of birth and mother’s maiden name to get your specific estimate. Enter your expected retirement age and future wages. Retirement estimator will provide a quick and reliable online benefit estimate. And there’s no need to worry about web security – the website does not disclose any personal information, such as your earnings or address that could lead to identity theft.

2. Decide when to start taking Social Security payments
1. Find out your full retirement age
Depending on your year of birth, the full retirement age is determined as follows:

Year of Birth

Full (Normal) Retirement Age

1937 or earlier



65 and 2 months


65 and 4 months


65 and 6 months


65 and 8 months


65 and 10 months




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

1960 and later


Source: Social Security Administration

2. Know the pros and cons of an early retirement
The earliest you can start receiving Social Security retirement benefits remains age 62. What are the consequences of taking an early retirement? The Social Security administration provides the following guidelines: if your full retirement age is 67, then the reduction for starting your benefits at
• Age 62 is about 30 percent;
• Age 63 us about 25 percent;
• Age 64 is about 20 percent;
• Age 65 is about 13 and 1/3 percent; and
• Age 66 is about 6 and 2/3 percent.
Here is a link to the table that provides a more detailed explanation:
Bottom line: Whether you take early or late retirement, the TOTAL amount of Social Security benefits you receive over your lifetime is going to be the same (assuming an average life expectancy). You either receive less over a longer period of time, or more over a shorter period of time.

2. Factors to consider for taking early, normal or delayed retirement
Here are some of the factors you may want to consider when making this decision; some of the questions come from the Social Security Administration’s materials, and others from speaking with retirees who have made this decision.
1. Are you still working?
If you plan to continue working, there are limits on how much you can earn and still get your benefits between age 62 and your full retirement age. Once you reach your full retirement age, there is no limit on how much you can earn.
2. Do you come from a long-lived family?
About one out of every four 65-year-olds today will live past age 90; one out of ten will live past age 95. Longevity risk is the risk running out of money because of health and other expenses that occur late in life, when higher Social Security payments may come in handy.
3. How is your health?
If you are not in good health, consider taking your benefits early.
4. Will you have health insurance?
Most people will receive Medicare coverage only after they reach age 65. If you decide to retire early, make sure you have health insurance coverage from either retiree health benefits, temporarily extending your health insurance at work, or by switching to your spouse’s health insurance. Even if you have health insurance elsewhere, remember to sign up for Medicare Part B (medical insurance) and Part D (prescription drug coverage) within 3 months of your 65th birthday. If you do not, it may cost more and be delayed.
5. Are you eligible for benefits on someone else’s record?
One of the spouses may take the benefits, while the other delays them and takes advantage of delayed retirement credits.
6. Do you have other income to support you if you decide to delay taking your benefits?
Are you in a situation where you need the money right away, or do you have a job or investments that cover your expenses? The same question concerns health insurance. Even if you have health insurance elsewhere, remember to sign up for Medicare Part B (medical insurance) and Part D (prescription drug coverage) within 3 months of your 65th birthday. If you do not, it may cost more and be delayed.
7. Will other family members qualify for benefits with you on our record?
If a spouse, a minor or a disabled child qualifies for benefits with you, consider the total value of the benefits you will receive. This decision, however, will affect how much your surviving spouse may receive.
8. Do you have concerns about political risk around Social Security?
There is a political and economic risk to Social Security that is difficult to ignore. Many retirees choose to take payments as early as possible for fear of changes in the way that Social Security is going to be administered.
9. Do you have a positive time preference?
Will you be better off using this money now? If you are not concerned about paying your bills later on in life (because you have plenty of savings, pension income, etc.), and want some extra money to spend when you have an appetite for travel and other active pursuits, the safety net aspect of Social Security comes second to instant gratification.

Consider these factors when you make your decision and remember that longevity risk needs to be covered. You don’t want to outlive your savings, but rather maintain or increase your standard of living at any age.

A note on Medicare
Even if you decide to delay your retirement, remember to sign up for Medicare Part B (medical insurance) and Part D (prescription drug coverage) within 3 months of your 65th birthday. If you do not, it may cost more and be delayed.
3. Apply for Social Security retirement benefits at Start your claim immediately and avoid the trip to the Social Security office.

Your action plan
1. Estimate your social security.
• Visit

2. Find out your full retirement age
• Use the table above.

3. Decide when to start taking Social Security
If you are approaching 62 years of age, review the pros and cons of taking early vs. normal vs. delayed Social Security payments, and consider the 9 factors involved in this decision. Remember to apply for Medicare within 3 months of turning 65, even if you delay your Social Security payments; it will cost more otherwise.

4. Apply for Social Security retirement benefits
Apply at Avoid the trip to the office.

Information from has been cited in this article.
Copyright 2012

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