Broker Check

What do Social Security and the Lottery have in common???

September 24, 2020

Very little but have you ever daydreamed about winning the Super Lotto? If so, maybe you debated the payout options in your mind. “Do I take the lumpsum or do I take the 20-year payout?” Deciding how to take your Social Security benefits is like that, only on a smaller scale and without the potential to purchase that yacht of your dreams.

Social Security benefits are an important part of retirement for most people. Here is brief summary on some of the components.

Earning Benefits

Let’s talk about how your Social Security Primary Insurance Amount (PIA) is calculated.  First, to quality for full benefits you must earn 40 quarter of credit. A quarter of Social Security credit is earned for each calendar quarter in which you earn at least $1,360.

Calculating Benefits

The Social Security Administration website,, can provide you with your specific benefit projections. The benefit amount is calculated using your 35 highest years of earnings and adjusting for inflation. They take the average of these 35 years to determine an Average Indexed Monthly Earnings (AIME) amount. Once this amount is calculated they apply a formula that uses bend points or tiers to calculate your final benefit amount.

Spousal Benefits

A spousal benefit is based on the differential between a percentage of your spouse’s Primary Insurance Amount(PIA) and your own PIA. As an example, a husband and wife are the same age and reach Full Retirement(FRA) age at 66. The wife has a PIA of $2,000 per month and the husband has a PIA of $750. The spousal benefit is equal to the difference of 50% of her PIA($1,000) and his PIA ($750). In this case it would be $250 and it would be added to his PIA of $750 for a total of $1,000 per month.

Divorced Benefits

If you are divorced and were married for 10 years, you are eligible to receive spousal benefits, as long as you remain unmarried. The calculation is like the spousal benefits outlined above. The exception is that your ex-spouse doesn’t have to apply for their benefits for you to be eligible. Additionally, the ex-spouse won’t be aware that spousal benefits are being taken.

Starting Benefits

The big question is, when should I start my benefits? The answer can make a significant impact to your retirement. Starting your benefits early will reduce your annual benefits by about 8% per year. Delaying your benefits will increase your annual benefits by about 8% per year.

We help our clients evaluate all these variables along with their personal situations to enable them to see which strategy will help them achieve their goals in retirement. Contact our office to discuss your Social Security planning.

Not associated with or endorsed by the Social Security Administration or any other government agency.