The Social Security Administration (SSA) pays monthly retirement benefits to individuals qualified to receive them. The SSA uses the age at which a person chooses to begin receiving payments and his 35 years of highest earnings to determine the amount of his retirement benefit. The SSA reduces or increases a person's monthly benefit depending on whether he retires before or after his full retirement age. Once a person initiates payments, the SSA generally pays him the same monthly amount for not only the remainder of the year in which he begins receiving benefits, but for the rest of his life.
A person can qualify to receive SSA retirement benefits based on his work history or the work record of a current or former spouse. The SSA assigns a certain number of work credits a person must accrue to qualify for benefits based on his corresponding age. In general, the SSA requires a person to accumulate 40 work credits to qualify to receive SSA benefits.
In 2011, a worker earns one work credit for every $1,120 he earns, up to a maximum of 4 credits for the year.
Even though the SSA assigns a full retirement age of between 66 and 67 to people born between 1943 and 1960, the SSA allows people qualified to receive retirement benefits to receive them as early as age 62. Because the SSA expects a person who begins receiving benefits before his full retirement age to receive them for a longer period of time than if he waited until his full retirement age to receive them, it reduces his monthly benefit to account for the longer pay period.
If a person is within 36 months of his full retirement age, the SSA reduces his benefit by 5/9 of 1 percent for every month he chooses to receive payments before his full retirement age. In contrast, the SSA increases the person's benefit to 100 percent if he delays receiving benefits until he reaches his full retirement age. For every year a person waits to receive benefits after reaching full retirement age, the SSA increases his benefit by up to 8 percent through age 69.
If a 63-year-old born on May 15, 1948 decides to begin receiving SSA retirement benefits in May 2011, the SSA will pay him approximately 80 percent of his full benefit. Comparatively, if a 63-year-old born on February 15 1948 chooses to receive benefits on the same date, he will receive approximately 81.67 percent of his full benefit.
If a person begins receiving retirement benefits before reaching his full retirement age in 2011 and continues to work, the SSA will reduce his monthly benefit by $1 for every $2 he earns above $14,160. The SSA no longer reduces a person's benefit because of his earnings once he reaches full retirement age.