Question

Jack’s Social Security Normal Retirement Age is 67. If he chooses to receive Social Security retirement benefits early beginning at age 62, and his normal age retirement Primary Insurance Amount (PIA) is $2,000, how much can Jack expect to receive as a monthly retirement benefit?

Answer 1

Normal retirement age = 67

Early start age = 62 years

Hence, social security is being claimed 5 years (= 67 - 62) prior to the full retirement age. The following rules will apply:

1. Up to first three years of early retirement, the PIA will be reduced at the rate of 6.67% per year. Hence reduction in PIA due to this = 6.67% x 3 = 20%
2. For the next two years of early retirement, the PIA will further be reduced by 5% per year. Hence, reduction in PIA due to this = 5% x 2 = 10%

Hence, total reduction in PIA = 20% + 10% = 30%

Normal age retirement Primary Insurance Amount (PIA) is $ 2,000

Due to his choice of receiving the Social Security retirement benefits early, Jack can expect to receive as a monthly retirement benefit an amount = Normal age retirement PIA x (1 - 30%) = $ 2,000 x (1 - 30%) = $ 1,400