A participant at one of my recent seminars asked about delayed retirement credits so they are part of this season's topic.
Starting your Social Security retirement at 62, or at any age younger than your full retirement age (FRA), results in a permanently reduced benefit. On the flip side, delayed retirement credits (DRC) increase your SSA retirement amount if you choose to delay starting benefits until after full retirement age. If you were born from 1943-1954, your full retirement age is 66.
DRC increases are based on the number of months you do not receive benefits between your FRA and age 70. There is no additional benefit increase after you reach age 70, even if you continue to delay taking benefits. For people born in 1943 or later, the yearly rate of DRC benefit increase is approximately 8 percent or 2/3 of 1 percent per month.
Over time, this increase can be significant. For example, assume your FRA is 66 and your unreduced monthly benefit starting at that age is $1,000. Deferring benefits until age 70 would increase your monthly amount to $1,320 because of delayed retirement credits, about 32 percent more than the monthly amount payable if starting at FRA. This higher benefit continues for as long as you live and could increase potential survivor benefits to your widow or widower.
While some choose to defer benefits and earn DRC's, this option of waiting to start SSA retirement until some point past your full retirement age is not the choice of most people. This is especially true since annual earning test restrictions end with the month you reach FRA and, from that point, you can receive all of your SSA retirement benefits without being limited by gross wages or net self-employment earnings.
The annual earnings test involves how your work earnings in a year might affect any SSA retirement payable in that year. A special monthly test is used for one year, usually the first year of retirement, but the full calendar year amounts for 2011 are unchanged from 2010 and remain as:
If under your FRA for the entire calendar year, $1 in benefits will be deducted for each $2 earned above the 2011 limit of $14,160.
If your reach FRA in 2011, $1 in benefits will be deducted from each $3 earned above the 2011 limit of $37,680, but only for earnings before the month you reach FRA.
No earnings limit exists starting with the month you reach FRA.
Visit the online SSA retirement planner at (www.socialsecurity.gov/retire2) for more about full retirement age, delayed retirement credits and the earnings test.
Contact the Social Security Administration in several ways. Visit the SSA website at (www.socialsecurity.gov) for information, retirement planning tools and online applications. There you can also request services including verification of your existing benefit amount at "What you can do online." Call the SSA national toll-free number 800-772-1213 (TTY 800-325-0778) from 7 a.m. to 7 p.m. to make an appointment or for information about your benefits. To reach the Minot office directly, call 866-415-3193 from 9 a.m. to 4 p.m. (Note there is a new Minot phone number.)
Howard I. Kossover is the Social Security Public Affairs Specialist for North Dakota and western Minnesota. Questions of general interest can be sent to him at email@example.com.