Social Security Benefits

Due to the complex nature of this material, it is suggested you review this with a financial professional.

Social Security Benefits – the foundation of retirement

Social Security payments are important to most Americans. With people living longer, retirement could last 30 years or longer, it’s very important to consider when you should start receiving social security income.


The average monthly Social Security benefit for a worker retiring at the beginning of 2012 was about $1,230, while the maximum possible benefit for someone retiring at the full retirement age of 66 in 2012, would have been $2,513.[1] Since the amount of your benefit is permanently affected by your age when you start your income, it’s critical to be aware of the long-term impact of taking benefits before you reach your “full retirement age.”

  • You can start your Social Security retirement benefits as early as age 62, but the benefit amounts you receive will be less than your full retirement benefit amount. If you start your benefits early, the amount will be permanently reduced based on the number of months you receive before you reach your full retirement age.

As you can see in the above chart, if you were born in 1955, your full retirement age is 66 years and two months. If you draw Social Security at age 62, your benefit would be reduced by 25.83%.

  • If you collect Social Security before reaching full retirement age, your Social Security benefits would have been reduced if you earn over $15,120 in 2013.[2] When you reach your full retirement age, any month in which benefits were reduced will be removed from the early retirement deduction calculation, which may raise the benefit paid.
  • If you reached full retirement age in 2013, delaying benefits beyond full retirement age would have resulted in an 8% per year benefit increase. This increase would reach its maximum value when you reach age 70.
  • As much as 85% of your Social Security benefits may be subject to the federal income tax.
  • Since a surviving spouse’s survivor’s benefit is based on the deceased spouse’s income amount, you should consider a death scenario when thinking about taking Social Security before reaching full retirement age.
  • You may want to adjust the age you take retirement income in order to gain the maximum benefit over your lifetime. Since there are many variables to consider (income tax, life expectancy, survivor’s benefit, etc.) you should be careful when considering any break-even analysis.

In our current economic environment, many more people are finding themselves forced into taking Social Security benefits early. They have been unable to find employment, and are relying on social security benefits to provide much needed income. People do what they have to do. Every situation is different, but everyone should consider all of the facts before they elect to receive the benefit.

  • If you are actually retiring, go through the math. Taking your Social Security benefit at age 62 may be a good thing. If it would take you up to age 78 to reach the same total dollar distribution, why go through the decision dilemma? Keep in mind that any income you earn prior to full retirement age would reduce your benefit.
  • If you expect to live longer than average, the reduced benefit is in effect for the rest of your life. Consider the amount you may be giving up over your lifetime.
  • If you plan on working while drawing Social Security, before reaching full retirement age, consider the financial impact your earnings have on the total benefit you receive.
  • Drawing a reduced retirement income benefit may also reduce the income benefit your spouse receives if you die before your spouse.
  • If there is a significant age difference between you and your spouse, Social Security benefits are likely to be paid over a greater period of time. Keep in mind that Survivor’s Benefits are based on the amount you receive, so early benefits lead to reduced potential for a surviving spouse.

Not affiliated with the US government or any government agency.

Call your financial professional and tax advisor to discuss what may be appropriate for your situation.


If you were born on January 1 of any year, you should refer to the previous year. (If you were born on the first of the month, the Social Security Administration will figure your benefit (and your full retirement age) as if your birthday were in the previous month.


This document is for informational use only.


This document is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please note that American Brokerage Services, its affiliated companies, and their representatives, employees and agents do not give legal and tax advice. You are encouraged to consult your tax advisor or attorney.


All information provided can be confirmed via the Social Security Administration. You are encouraged to seek the advice of a Social Security representative.


[1] Social Security Administration, Eligibility/Computation of Benefits and Maximum Social Security Retirement Benefit, 2012.

[2] Social Security Administration, Fact Sheet, 2013Security Changes.