Determining Your Eligibility and Estimated Benefits

You can find out how many quarters of coverage you have accumulated and what your estimated benefit will be at the time of retirement by requesting Social Security Statement SSA-7004 (formerly known as the Personal Earnings and Benefit Estimate Statement) from the Social Security Administration (SSA). You can request a copy by mail, access it online by visiting the SSA website, or watch for one in the mail; they are sent out annually three months before your birthday. There is no charge for this service, and in addition to your quarters of coverage the statement will provide your earnings reported in each year.

Check out the SSA's online calculator, which allows you to project what your monthly benefit will be based on your actual work record.

How Benefits Are Calculated

You must attain your "full retirement age" before being eligible to receive your full monthly Social Security retirement benefit, which is referred to as your "primary insurance amount" (PIA). (You can choose to retire early, but you will then receive reduced benefits; see section below for details.) If you were born before 1937, your full retirement age was 65. If you were born after 1937 you must wait longer before attaining full retirement age, although exactly how long depends on your year of birth, according to the following table:

Note: persons born on January 1 of any year should refer to the normal retirement age for the previous year.

The Early Retirement Option

If you choose to begin receiving benefits at any point between age 62 and your full retirement age, you will pay a price in reduced monthly benefits for the rest of your life. If you take the early retirement option, your benefits will be reduced 5/9 of one percent for each month before your full retirement age that you begin receiving benefits, up to 36 months. For each month above 36 months before your full retirement age, the reduction formula is 5/12 of one percent. For example, if you were born in 1951 and decide to retire at age 62, four years before your full retirement age of 66, there are a total of 48 months of reduction. The reduction for the first 36 months is 5/9 of 36 percent, or 20 percent. The reduction for the remaining 12 months is 5/12 of 12 percent, or 5 percent. Thus, your total benefit reduction is 25 percent. If your full benefit (your PIA) was to be $1,200, your reduced benefit will be $900 ($1,200 - 25 percent = $900). You will receive this reduced benefit (plus cost of living adjustments) for as long as you receive Social Security retirement benefits.

Although most recipients take the early retirement option, whether you should depends on your need for income, the availability of other income sources, and your health and likely longevity.

The Delayed Retirement Option

Just as you pay a penalty for receiving benefits early, you receive a bonus for delaying their receipt beyond your full retirement age. All other factors being equal, the longer you expect to live, the longer you should delay starting to receive your Social Security retirement benefits. How much your deferment of benefits will increase your monthly check when you ultimately retire depends on your year of birth: 

Note: Persons born on January 1 of any year should refer to the credit percentage for the previous year.

If you delay your retirement beyond age 70, you will receive no further increases in your PIA, no matter how long you continue to work.

Here's an example of how the deferred retirement option might increase a beneficiary's PIA: Lena was born in 1948. Although she is eligible for her full Social Security retirement benefit at age 65, Lena doesn't plan to retire until she reaches age 68. The table above tells us that her annual percentage increase in benefits will be 8 percent. Since she will delay her retirement three years, the Social Security check she will begin receiving when she retires will be 24 percent higher (3 years x 8 percent per year). If Lena's monthly benefit would have been $1,000 had she retired at age 65 (including any cost of living adjustments that were made between age 65 and her retirement), the monthly benefit she will begin receiving at age 68 will be $1,240.

In determining whether to either postpone your retirement or cut back on your work hours, call the Social Security Administration at (800) 772-1213 or use the SSA's Retirement Estimator. The SSA can tell you exactly what your benefits will be under different scenarios.

One factor to keep in mind when considering the delayed retirement option: If you keep working after your full retirement age, your ultimate Social Security retirement benefits can also be higher because you will have more earning quarters on which to base your benefit calculation. This will be true whether or not you elect to begin receiving benefits while you continue working.

Finally, regardless of when you choose to begin receiving retirement benefits, you should remember to sign up for Medicare at age 65. You should do this during the period beginning three months before your 65th birthday and ending three months afterwards.

How Does the SSA Calculate the Monthly Benefit?

The process by which the SSA calculates your PIA is fairly complicated, but it is based on your earnings history. The formula is somewhat redistributive in that the first few hundred dollars of earnings are given more credit than the last few hundred. So, in relationship to earnings and contributions to the system, low wage earners receive more back in Social Security retirement benefits than do high wage earners.

Appealing Social Security Decisions

If your application for benefits from any Social Security program is denied or you are receiving less than you believe you deserve, you can appeal. Appeals are most common with disability claims. A large percentage of decisions are changed in the appeal process. For example, almost half of all disability claim appeals are resolved in favor of the beneficiary. There are four stages of the appeal process, and you must go through each before you can move to the next. They are: request for reconsideration, a hearing before an administrative law judge (ALJ); a request for review of the ALJ's decision by the Social Security Appeals Council in Washington, D.C.; and, finally, a lawsuit filed in federal court. At each stage in the process, you have 65 days from the date on a written notice of the Social Security Administration's decision at the previous stage to let the SSA know that you are appealing to the next stage.

• Find Social Security Forms
• Find your local Social Security Office
• Calculate your Social Security benefit
• Calculate the effect of retirement earnings on benefits
• Learn more about disability benefits