Social Security Primer

BEFORE RETIREMENT

• A percentage of earnings is paid to Social Security throughout your working years
• Only the top 35 earning years (not consecutive) will be included
  • Any years with no income will be recorded as zeros

CALCULATING YOUR BENEFITS

There are three factors in determining your Social Security benefits:

1. Your Birth Year
   • Click here to see how your birth year affects your benefits
2. Lifetime Earnings
   • Calculated as a percentage of income during your top 35 earning years
3. Start Date (from age 62-70)
   • Waiting until your full retirement age (FRA) ensures that you receive 100% of your Social Security benefit
   • Taking Social Security payments early or deferring them until after your FRA will decrease or increase those payments, respectively (see below)

To find your full retirement age, click here.

BEGINNING WITHDRAWALS

• Once you begin taking Social Security, the withdrawal amount will remain static throughout the remainder of your life (not including Cost of Living Adjustments)
  • e.g. if you take early withdrawals, the amount will NOT increase once you reach FRA

OTHER CONSIDERATIONS

Although deferring Social Security will increase your payout, it’s important to keep other factors in mind too. Every situation is unique. Using a Social Security strategy that’s right for you could have lifelong effects on you and your family.

THE TRADE-OFF (an example):

John, born in 1954, learns that his total Social Security benefit at FRA (age 66) will be $1,500 monthly. John has to decide between receiving more, smaller payments, or fewer larger ones.

See how long it would take John to break even depending on when he begins withdrawals:
If John lived to be 90, check out the graphic below to see what he would gain (or give up) over the course of his life depending on when he begins withdrawals.
This topic can be difficult to grasp – and sometimes even more difficult to decipher which strategies might work best for you. We’re here to help.More resources:

• https://investor.vanguard.com/retirement/social-security/what-is-social-security
• SS Retirement checklist: https://www.ssa.gov/pubs/EN-05-10377.pdf
• Find your FRA: https://www.ssa.gov/planners/retire/ageincrease.html
• Social Security Quick Calculator: https://www.ssa.gov/OACT/quickcalc/