Getting Your Financial Ducks In A Row Rotating Header Image

primary insurance amount

Should I Use IRA Funds or Social Security at Age 62?

Image via Wikipedia Folks who have retired or are preparing to retire before the Social Security Full Retirement Age (FRA) face a dilemma if they have IRA assets available. Specifically, is it better to take an income from the IRA account during the years prior to FRA (or age 70) in order to receive a larger Social Security benefit; or should you preserve IRA assets by taking the reduced Social Security benefits at age 62? At face value, given the nature of IRA assets, it seems like the best thing to do is to preserve the IRA’s tax-deferral on those assets, even though it means that your Social Security benefit will be reduced. If you look at the taxation of Social Security benefits though, you might discover that delaying receipt of your Social Security will provide a much more tax effective income later in life. In the tables below I’ll […]

Social Security Bend Points for 2016

When the Social Security Administration recently announced that the maximum wage base and the Cost-of-Living Adjustment (COLA) would remain unchanged for 2016, they also announced the bend points that are used to calculate both the Primary Insurance Amount (PIA) for Social Security benefits. In addition, the Family Maximum Benefit (FMax) bend points for 2016 were also announced. Wait a second! You may be wondering just why the bend points are changing when there was no increase to the COLA? Excellent question, as it shows you’ve been paying attention. This is because the bend points are based upon the Average Wage Index, which adjusts annually regardless of whether the numbers go up or down, whereas the COLA and the maximum wage base only goes up. Bend points can go down from one year to the next – it’s only happened once, in 2009, but it could happen again. For more on […]

How to Compute Your Monthly Social Security Benefit

So you’ve seen your statement from Social Security, showing what your benefit might be at various stages in your life.  But not everyone files for benefits at exactly age 62 or 66 – quite often there are months or years that pass before you actually file.  This article will show you how to compute your monthly Social Security benefit, no matter when you file. Computing your monthly Social Security benefit First of all, in order to compute your monthly Social Security benefit, you need to know two things: your Primary Insurance Amount (PIA) and your Full Retirement Age (FRA).  The PIA is rather complicated to define, but for a shorthand version of this figure, you might use the figure that is on your statement from Social Security as payable to you on your Full Retirement Age (or “normal” retirement age).  

Computing Your Social Security Monthly Benefit

When planning for Social Security retirement benefits, it is important to know how to compute the amount of your benefit at various ages.  The amount of your benefit will be different depending upon your age when you begin drawing the benefit, as well as your record of earnings over time. Below are the factors that are needed in order to determine the amount of your Social Security benefit: Your Primary Insurance Amount, or PIA Your Full Retirement Age, or FRA, which is determined by your year of birth Your age when you will begin drawing benefits Whether or not the Windfall Elimination Provision (WEP) applies to your benefits This earlier article has information about the PIA, and you can find your PIA on your Social Security statement.  Your FRA, if you were born between 1943 and 1954, is 66.  If you were born in 1955 or after, FRA gradually increases […]

A Quick and Dirty Way to Determine Your PIA

We’ve gone over the long, painful, detailed way to calculate the Primary Insurance Amount (PIA) in many different articles and my book.  The PIA is central to most of the calculations we do, such as your own benefit (reduced or increased if you file early or late), survivor benefits, and the like. Sometimes it is difficult to actually know find out what your PIA actually is.  Here’s a quick and dirty way to figure it out: Go to the Social Security website and get your statement (  On page 2 at the top you’ll see either your Full Retirement Age (FRA) benefit amount, or the amount at your current age if you’re over FRA.  Oftentimes we refer to this FRA amount as your PIA, but nearly always with a qualification.  This is because the benefit amount illustrated on this statement is assuming that you continue earning at your current level […]

Calculating the PIA

WOMEN’S HISTORY MONTH (Photo credit: mademoiselle louise) In determining your retirement benefits from Social Security, as well as those of any dependents who may claim benefits based upon your record, the Primary Insurance Amount, or PIA, is an important factor.  The PIA is the amount of benefit that you would receive if you began receiving benefits at exactly your Full Retirement Age, or FRA. (see this article for information about determining your FRA). The PIA is only one of the factors used in determining the actual amount of your retirement benefit – the other factor being the date (or rather your age) when you elect to begin receiving retirement benefits. So, how is PIA calculated? There are several factors that go into the calculation of the PIA.  You start off with your Average Indexed Monthly Earnings (AIME – which we defined in this article about the AIME).  Then, we take […]

It Pays to Wait For Your Social Security Benefits

It’s usually best, for most things in the financial world, to act now rather than waiting around. The notable exception is with regard to applying for Social Security benefits. We’ve discussed it before (in fact part of this article is a re-hash of an earlier post) but it is an important point that needs more emphasis, in my opinion. As you’ll see from the table below, if you’re in the group that was born after 1943 (that’s you, Boomers!) you can increase the amount of your Social Security benefit by 8% for every year that you delay receiving benefits after your Full Retirement Age (FRA – see this article for an explanation). Delaying Receipt of Benefits to Increase the Amount If you are delaying your retirement beyond FRA, you’ll increase the amount of benefit that you are eligible to receive. Depending upon your year of birth, this amount will be […]