Actuarial tables and studies that calculate longevity are the basis for determining Social Security benefits. As Americans live longer, the figures have changed. Social Security reforms in 1983 made significant changes to retirement benefits, increasing the retirement age from 65 to 66 and 67 over an extended length of time.
Although the retiree must have 40 credits or ten years of work history, income over 35 years is the basis for determining individual Social Security benefits. Calculations use the highest earning periods for determining Social Security benefits. A retiree paying the maximum from age 22 to age 66 could receive a maximum of $2,346 a month in Social Security benefits in 2010.
Full Retirement Age
The primary insurance amount, or PIA, calculations establish the benefit at full retirement age. Full retirement age depends on the birth date of the retiree. Retirees born before 1943 reach full retirement age at 65. Age 66 is full retirement age for birth dates from 1943 through 1954. Social Security adds two months for every year after 1954 up to 1960. Those born in 1960 reach full retirement age at 67.
PIA calculations determine Social Security benefits, and early-retirement benefits may begin at age 62. Benefits at 62 are about 75 percent of benefits at full retirement age. Benefits at age 70 may be as much as 32 percent higher than at full retirement age. The overall Social Security benefits for a lifetime are about the same whether you choose to get a lower amount over a long period of time or a higher amount over a shorter period of time. Health and financial condition may factor in. Unemployment after age 62 draws many into retirement early.
Social Security benefits based on a spouse’s work history allow the retired worker to draw benefits and the spouse to get as much as 50 percent of the worker’s benefits. This arose from a time when women did not work outside the home and continues to provide either spouse some income in retirement. If a worker takes early-retirement benefits, that can affect the potential benefits for a spouse if the spouse uses the other's work history for benefits. An older worker who waits to retire at full retirement age gets 100 percent of the PIA. If the spouse waits to full retirement age, she gets 50 percent, for a family total of 150 percent. Benefits at age 62 for the spouse are 32.5 to 35 percent of the PIA.
The basis for determining survivor benefits relates to when the worker takes retirement. A worker who takes early retirement reduces survivor benefits for a spouse and children and parents over age 62 who are dependent on the worker. Survivor benefits, like retirement benefits, are based on PIA and full retirement age. Survivor benefits are based on full retirement age if the worker has not taken benefits and dies before full retirement age.