Most people who work for a living, either as employees or as self-employed persons, are covered by Social Security's old age, survivors and disability insurance program.As a retirement program, Social Security pays a monthly cash benefit to workers who have the equivalent of at least 40 months of work under Social Security, and who are at least 62 years old. The amount of the benefit is based on the worker's primary insurance amount. The PIA depends on how long he worked under Social Security and the amount of his Social Security wages. Social Security benefits may also be paid to a retired worker's qualifying dependents, such as a spouse, a widow or widower, and certain children. The benefits of a worker's dependents also are based on the worker's PIA.
If a worker retires at full Social Security retirement age, her benefits will equal her PIA. A worker who retires at or after age 62, but before full Social Security retirement age, will receive a reduced benefit. A worker who delays claiming benefits until after full Social Security retirement age will receive an increased benefit. The amount of the benefits of a spouse, widow or widower of a worker also depends on whether the benefits are claimed at, before or after full Social Security retirement age.
Full Social Security retirement age depends on when an individual was born, and on whether an individual is a worker, a spouse of a worker, or the widow or widower of a worker.
1. Full Social Security retirement age for workers and spouses of workers. A worker (or the spouse of a worker) who wants to receive full, unreduced Social Security benefits must wait until at least full Social Security retirement age to start receiving benefits.
While many individuals consider age 65 to be the normal retirement age, i.e., the age at which full Social Security benefits can be received, this is so only if a worker (or the spouse of a worker) was born before Jan. 2, 1938 (i.e., the worker (or spouse of a worker)), became 65 no later than Jan. 1, 2003. The full Social Security retirement age of a worker (or spouse of a worker) born:
* After Jan. 1, 1938, and before Jan. 2, 1939, is 65 years and two months.
* After Jan. 1, 1939, and before Jan. 2, 1940, is 65 years and four months.
* After Jan. 1, 1940, and before Jan. 2, 1941, is 65 years and six months.
* After Jan. 1, 1941, and before Jan. 2, 1942, is 65 years and eight months.
* After Jan. 1, 1942, and before Jan. 2, 1943, is 65 years and 10 months.
* After Jan. 1, 1943, and before Jan. 2, 1955, is 66 years.
* After Jan. 1, 1955, and before Jan. 2, 1956, is 66 years and two months.
* After Jan. 1, 1956, and before Jan. 2, 1957, is 66 years and four months.
* After Jan. 1, 1957, and before Jan. 2, 1958, is 66 years and six months.
* After Jan. 1, 1958, and before Jan. 2, 1959, is 66 years and eight months.
* After Jan. 1, 1959, and before Jan. 2, 1960, is 66 years and 10 months.
* After Jan. 1, 1960, is 67 years.
Example 1: Your client, who has worked under Social Security since 1960, was born on March 15, 1941. She will reach full Social Security retirement age on Nov. 15, 2006, since she will be 65 years and eight months old on that date.
Example 2: Your client was born on Oct. 15, 1940, and had reached full Social Security retirement age of 65 years and six months when he retired on April 15, 2006. Your client's wife was born on Jan. 5, 1943. Accordingly, she will not reach her full Social Security retirement age of 66 years until Jan. 5, 2009. If she elects to receive her Social Security benefits at the same time as your client, she will receive a reduced benefit. This is so regardless of whether her benefit is based on her own work record, or on your client's work record.
2. Full Social Security retirement age for widows and widowers of workers. The widow or widower of a worker is entitled to Social Security benefits equal to the worker's PIA if the benefits are claimed at the widow or widower's full Social Security retirement age.
Full Social Security retirement age for a widow or widower differs slightly from what it is for a worker or the spouse of a worker. If a widow or widower was born before Jan. 2, 1940, full Social Security retirement age is still 65. Full Social Security retirement age of a widow or widower born:
* After Jan. 1, 1940, and before Jan. 2, 1941, is 65 years and two months.
* After Jan. 1, 1941, and before Jan. 2, 1942, is 65 years and four months.
* After Jan. 1, 1942, and before Jan. 2, 1943, is 65 years and six months.
* After Jan. 1, 1943, and before Jan. 2, 1944, is 65 years and eight months.
* After Jan. 1, 1944, and before Jan. 2, 1945, is 65 years and 10 months.
* After Jan. 1, 1945, and before Jan. 2, 1957, is 66 years.
* After Jan. 1, 1957, and before Jan. 2, 1958, is 66 years and two months.
* After Jan. 1, 1958, and before Jan. 2, 1959, is 66 years and four months.
* After Jan. 1, 1959, and before Jan. 2, 1960, is 66 years and six months.
* After Jan. 1, 1960, and before Jan. 2, 1961, is 66 years and eight months.
* After Jan. 1, 1961, and before Jan. 2, 1962, is 66 years and 10 months.
* After Jan. 1, 1962, is 67 years.
3. Early retirement age. Early retirement age is the earliest age at which reduced old-age, spousal, or widow's and widower's benefits are payable. For old age and spousal benefits, early retirement age is 62. For widow's and widower's benefits, it is age 60. However, for disabled widows and widowers, it is age 50.
Example 3: Your client's wife died on July 10, 2006, at age 58. Your client was born on Jan. 25, 1942. Since he is over 60, he can elect a widower's Social Security benefit based on his wife's work record. However, if he elects to take the benefit immediately after his wife's death, he will receive a reduced benefit, since he will not yet have reached age 65 years and six months, the full Social Security retirement age for a widow or widower born after Jan. 1, 1942, and before Jan. 2, 1943.
4. Eligibility for Medicare is not affected by increase in full Social Security retirement age. An individual is still eligible for Medicare at age 65, even if his full Social Security retirement age is over 65.
In my next article, I will discuss how benefits are reduced for workers, spouses, and widows and widowers.
Bob Rywick is an executive editor at RIA, in New York, and an estate planning attorney.
