How Is The Reduction For Taking Early Benefits Calculated?

Dec 31 2016 - 10:45am

I haven't found an answer to this question either on the Social Security website or in your software: for someone born on January 4 who wants to apply for early retirement benefits at the age of 63 (in January 2017), should the application ask for benefits to start in January or February? In other words, if the applicant asks for benefits to start on January 1, 2017 (a few days before they turn 63) is the lifetime benefit calculation based on age 62 or 63?

Also, since it seems it will take a few weeks for benefits to begin, will the payments be retroactive to January?

Thank you!

Hi Brad,

A person who turns age 63 on January 4th 2017 and wants to start benefits effective with age 63 should choose January 2017 as their month of election to start benefits. And, they would need to file there application no later than January 31 2017, since no retroactivity is permitted for reduced benefits. The answer would be the same if their birthday was any day from January 2nd though February 1st, since Social Security counts you as attaining your next age one day prior to your actual birthday.

Social Security normally pays benefits in the month after the month that the payment is for, so payments for the month of January are due to be paid in February. For more information on scheduled payment dates, refer to the following reference:

By the way, retirement benefits are reduced based on the number of months that a person starts drawing prior to full retirement age (FRA). So, there is only a 5/9ths of 1% difference in benefit rates if you start at age 62 & 11 months, as opposed to age 63.

Before filing, you may want to consider running the maximization software available on this website. You may have better filing options available that you haven't considered.

Best, Jerry