Social Security Analyzed – Part 1 of 2

We have been “running the numbers” for Social Security benefit optimization to help clients choose the best strategy. We also analyzed Social Security more deeply that we ever have before in order to write our new book, Retire Secure! for Same-Sex Couples. This post is an adaption of a portion of the chapter on Social Security in the book that is applicable to everyone. If, after reading this excerpt you would like the rest of the chapter, please e-mail or call our office and we would be happy to send you the rest of the chapter. Of course we also offer custom analysis.

There are several sophisticated strategies that can be successfully used to maximize your benefits if you are married. But we find that many clients and readers need to understand some of the basic concepts and strategies before we move to the more sophisticated strategies which are usually possible if you are married.

For now, however, we will forget about the marriage issue. A point of contention regarding Social Security is when to begin receiving benefits: as soon as you are eligible, several years later, or even waiting until you are age 70. Let’s just talk about whether it makes sense, in general, to take Social Security early. For discussion’s sake, let’s assume your attitude is, “Well, gee, I’m retired, I’m 62 years old, I’ve been paying into this system for my whole life, and now it’s time for me to get some money out.” Should you start collecting Social Security benefits at 62?

Comparison of Taking Social Security at Age 62 or Age 70

First, it is important to understand that the dollar amount of your retirement benefit depends upon the age at which you begin to collect it. Let’s assume you were born between 1943 and 1954. Your Full Retirement Age (FRA) is 66. This is set by law. The amount you will get if you begin to collect benefits at age 66 is called your Primary Insurance Amount (PIA). If you begin to collect benefits at a different age, the amount you will receive is a function of your PIA. If you begin early, you obviously start receiving an income earlier, but allowing for interest, etc. (details to follow) you will receive less per month than if you had waited. If you start taking benefits at 62, the earliest age at which you can begin to collect benefits, you will suffer the maximum reduction in benefits. If you begin to collect benefits after full retirement age, you will receive larger benefits. You can get the largest benefit by waiting until age 70. So, the two extremes would be signing up for benefits at age 62, or waiting and taking at age 70. The earlier you collect, the lower your  benefit will be for the rest of your life.


The table on the left shows the percentage of your PIA (the amount you would get at age 66) that you will receive based on the age when you apply. For every year that you wait to collect benefits after Full Retirement Age (FRA) you will earn an extra 8% per year. Please note this table doesn’t include Cost of Living Adjustments (COLA), which in all instances make the advantages of waiting even greater.

Our next post will touch on running the numbers for a single Social Security recipient as well as Social Security breakdown analysis with benefits reinvested at 4%.