Social Security Basics

I recently attended a few workshops sponsored by GM and hosted by Fidelity.  Here's what I learned:

Important Terms:
FRA - Full Retirement Age - 66 or 67, depending on your birthday.

AIME - Average Indexed Monthly Earnings - This is the average monthly amount you earned in your highest-earning 35 years.  It is indexed for inflation.  AIME is used to calculate PIA.  If you don't have 35 years of earnings, zeros will be averaged in.

PIA - Primary Insurance Amount - amount of Social Security payments you will receive at full retirement age (FRA).

Estimating your benefits - your PIA is based on the average of 35 highest earning years, so try to work 35 years if possible.  Details are  here.

If you were a homemaker and didn't work many years, you can claim 50% of your spouse's PIA if that is more than yours.  It does not affect your spouse's amount.

When to claim your SS benefits?
If you wait until FRA, you get 100%.  If you claim earlier you get less, claim later you get more, until age 70 when the amount does not go up.  There's no magic to claiming at your FRA.  You can claim earlier or later. It's not "right" to claim at FRA, it's just one option.

From www.Fidelity.com/whentoclaimSS for birthdate in 1958

Age	% of PIA
62	70
63	80
64	87
65	93
66	100
67	108
68	116
69	124
70	127

For each year you wait you get about 8% increase in payments.
Better to wait if you have other resources, but it depends on your expected life expectancy.
The break even age is 81 or 82.  Will you be alive then?  If not, take SS early.

The average amount of SS paid is $1,300 per month, or $15,600 per year.
$2,788 is maximum you can receive per month.  So if you paid in buckets of money during your career you may reach this level at age 64, so you might as well start taking then, because it won't hurt you.

Survivor benefits can start when the survivor is 60 yrs old.

Working before FRA may reduce your PIA.  Details
here.  Some states tax SS income.

Will SS go bankrupt?  In the year 2034 trust fund will go dry, but SS can still fund 77% of obligations from taxes, we just won't have the trust fund.


One scary tidbit was that health care costs for a couple over 65, with Medicare, was $902 a month.