Determining Your Primary Insurance Amount

In 2011, the Social Security Administration (SSA) halted sending out paper statements to Americans, saving an estimated 70 million dollars. Currently, there are plans to resume sending out statements to those age 60 and over. As such, it can be challenging to determine the amount you will receive when you begin taking payments.

You can find this information by either calling the SSA or visitng its website (www.ssa.gov). You may also work with a financial services professional to help you get the answers you need to make an informed decision.

When Can You Start Receiving Your Social Security Benefit? 

You may begin to receive early benefits from Social Security at age 62. If you start before your Full Retirement Age (FRA), however, your benefit will be reduced. At age 62, your benefit will only be 75 percent of your Primary Insurance Amount (PIA). Depending on your lifespan, this can drastically reduce the amount of Social Security you receive over your lifetime.

Each year you delay receiving your Social Security benefit, your payment will increase. Once you reach your FRA, you can begin receiving your unreduced, full PIA. You can continue to delay receiving benefits until age 70. Your benefit will increase by eight percent each year, from your FRA until a max at age 70. By delaying payments from age 62 to 70, recipients will receive a 32 percent increase in benefits.

When Should I Apply for Social Security? 

One of the most challenging questions is when to start receiving your Social Security benefit. There are pros and cons to delaying your benefit as well as receiving it as soon as you become eligible.

Two primary factors may help you make your decision. First, do you need the money? If you need the income to cover expenses in retirement, your decision is made. If you do not need the money, it might make sense to delay receiving your benefit and let your future payments continue to increase. The second factor is your health and life expectancy. Individuals in poor health may want to begin receiving their benefits earlier rather than later. If you are in good health and have a history of longevity in your family, it may behoove you to wait. No matter what you decide, there is an element of risk in your decision because your finances and health can change throughout retirement.

There are calculators to help you determine your available benefit at various ages. By determining your breakeven age and your projected life expectancy, you can make an informed decision about when to apply for your Social Security benefit.