Personal Retirement

Overview of Social Security Retirement Benefits

Overview of Social Security Retirement Benefits
ELIGIBILITY

ELIGIBILITY

In order to be eligible for Social Security, you must have accrued 40 credits of Social Security. How do you know if you accrued 40 credits or more? You must have been working, or self-employed, and paid into the Social Security system for 10 years.

EARNING CREDITS

EARNING CREDITS

You can earn up to four credits per year. The amount needed for one credit in 2017 is  $1,300 in net earnings. By extension, two, three and four credits would require $2,600, $3,900 and $5,200, respectively, in net earnings. The amount needed to earn one credit increases automatically each year when average wages increase. The SSA refers to the Cost-of-Living Adjustments (COLA) on the CPI-W report published by the Bureau of Labor Statistics when determining the amount needed to earn one credit each year.7

MINIMUM AGE REQUIREMENT

MINIMUM AGE REQUIREMENT

As discussed in When to Collect, you must be at least 62 to collect.

BENEFIT CALCULATION

BENEFIT CALCULATION

The Social Security retirement benefit amount is based on an individual’s work history. Specifically, the benefit amount is calculated based on an average of the individual’s highest 35 years of earnings, which are adjusted for inflation. Maximum benefits are awarded at full retirement age to individuals who worked 35+ years.8 If the individual’s employment was less than 35 years, inconsistent or the earnings were below the taxable wage base, then the individual will receive less than the maximum benefits.

MAXIMUM BENEFIT RETIREMENT FOR 2017

MAXIMUM BENEFIT RETIREMENT FOR 2017

Maximum Benefit Retirement for 2017 (Full Retirement Age) is $44,880 annually, or 27.5% of earnings.8 The maximum benefit is only payable to those who attain their normal retirement age prior to collecting and who had the maximum taxable earnings for at least 35 years of working.

STATEMENT AVAILABILITY

STATEMENT AVAILABILITY

The Social Security Administration sends paper statements to workers at ages 25, 30, 35, 40, 45, 50, 55 and 60 and over, who are not receiving Social Security benefits and have not established a My Social Security account. You will receive your statements via mail three months prior to your birthday. You may receive your most current statement online at any time by creating a My Social Security account at https://www.ssa.gov/myaccount/.

Cost-of-Living Adjustments (COLA)

Social Security’s general benefit increases have been based on increases in the cost of living, as measured by the Consumer Price Index. COLA increases a person’s retirement benefit.

Each benefit is based on a primary insurance amount, or PIA. PIA is the benefit a person would receive if he or she elects to begin receiving retirement at his or her full retirement age. At full retirement age, the bene t is neither reduced for early retirement nor increased for delayed retirement. PIA is directly related to the primary beneficiary’s earnings through a benefit formula. The formula is the sum of three separate percentages of portions of average indexed monthly earnings. The portions are determined by the year in which a worker turns 62, becomes disabled before 62 or dies before 62.

PRIMARY INSURANCE AMOUNT (PIA) WILL BE THE SUM OF:

90%

of the first $885 of your average indexed monthly earnings, plus

32%

of your average indexed monthly earnings over $885 through $5,336, plus

15%

of your average indexed monthly earnings over $5,336

Round this amount to the next lower multiple of $.10.

Once PIA is determined it is subject to annual COLA adjustments. For example, if the initial PIA is $1,393.50 and it is increased by a 1.7% COLA, the new PIA would equal $1,417.10.

For more information, refer to the 2017 Social Security Changes.pdf on the Social Security Administration website.

This webpage is provided for informational purposes only and is not provided as a sales or advertising communication nor does it constitute tax, legal or investment advice or a recommendation for any particular investment product or strategy for any particular investor. This webpage does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. This material (or any portion thereof) may not be copied or distributed without The Bank of New York Mellon and all its affiliates’ prior written approval. Statements are current as of the date of the material only.

7 “How You Earn Credits, 2016,” Social Security Administration.

8 “Estimated Annual Benefit Amount Payable to Retired Workers...,” Social Security Administration, “2017 Social Security Changes Fact Sheet,” October 2016.

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