Before I start today’s column — a word of warning. It’s going to involve a lot of messy math, and I don’t like math. To be more precise, I don’t like including too much math in my column because I’ve…
like including too much math in my column because I’ve learned over the years that putting lots of numbers in a column just confuses so many of my readers and turns them off. But alas, I’ve got to get into messy math to explain today’s topic: how Social Security benefits are reduced if taken before full retirement age.
People are also reading… Part of the problem is that there are different reduction rates for different kinds of Social Security benefits. Let’s start with retirement benefits. If you take those benefits before you reach full retirement age, your Social Security checks will be reduced five-ninths of 1% for the first 36 months and five-twelfths of 1% for any remaining months.
Let’s use the same numbers as in Wilma’s case above. So, if Betty took benefits at 62, her normal spousal rate of $1,500 would be reduced by 35% giving her a $975 monthly benefit. The SSA rep was telling her that she was going to get 32.5% of her husband’s full retirement benefit. And 32.5% of $3,000 equals $975.
To go to the other end of the benefit start date spectrum, let’s say Fred waited until age 70 to begin his benefits. That means he’ll get a 32% bonus added to his monthly benefits. In other words, he is actually getting $3,960 per month. But again, Wilma’s spousal rate is based on Fred’s FRA benefit, or $3,000, not on his augmented benefit of $3,960.
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