(upbeat music) <v ->Hi, I am Yvette with AARP.</v> I lead workshops in my community to help older adults stay connected and age successfully. Let's take a look at the Social Security retirement benefit that you earn by working. We'll start by watching a short video. (upbeat music) <v ->How does Social Security work?</v> <v ->The government wants to make sure</v> that you have at least some income after you retire. So, if you've worked for 10 years or more and paid your Social Security taxes, which typically come out of your paycheck, you'll get Social Security retirement benefits. When you're ready to retire, the Social Security Administration takes your 35 highest paid years and plugs them into a formula that determines your monthly benefit. <v ->Hmm. Does everyone qualify?</v> <v ->If you spent a combined total</v> of 10 years doing work for which you paid Social Security taxes, you qualify. You can start collecting as early as age 62. Though, the longer you wait, the higher your monthly benefit. If you wait until you're 70 to collect, you'll get your maximum monthly benefit. If you become disabled before you reach age 62 or before you work for 10 years, you may still qualify for Social Security Disability Insurance. <v ->Got it.</v> Those monthly payments will really help me. <v ->That's the idea.</v> Social Security was never intended to replace your salary or to be your sole income. It was meant to help supplement your retirement income. To learn more, go to aarp.org/socialsecurity. <v ->Okay, now you've got the general idea.</v> Let's explore in more detail. When you work and pay Social Security tax, you earn credits, also called quarters of coverage. You can earn up to four credits each calendar year, and you need 40 credits to qualify for your retirement benefit, but it doesn't necessarily take a calendar year to earn your four credits. Each time you reach a certain amount of earnings, on which you pay Social Security tax, you earn one credit. Here is how much you need to earn to get each credit this year up to the maximum of four credits for the year. But what if you're not sure if you've earned your 40 credits? Just go online and check your my Social Security account. If you don't have a my Social Security account, also known as mySSA, it's quick and easy to create one at login.gov. Your my Social Security account will also give you estimates of your future retirement benefit. Your account shows your earnings record so be sure to review it and make sure all your earnings are posted. Missing earnings could affect your benefit so contact the Social Security Administration if something doesn't look right. You might be wondering how the Social Security Administration calculates your monthly retirement benefit. They use a combination of your lifetime earnings and the age at which you start collecting benefits. First, they adjust your past earnings to account for changes in average wage levels during your working years. This is called indexing. After they index your earnings, they pick out your highest earning 35 years and plug those into a formula. That's how they come up with your Primary Insurance Amount or PIA. The Primary Insurance Amount is the amount you collect if you start your benefit at your Full Retirement Age, which is between ages 66 and 67 depending on the year you were born, but you don't have to collect at Full Retirement Age. You also have the option to start collecting benefits as early as age 62, but if you do that, your monthly benefit will permanently be lower. On the other hand, if you wait to collect your benefit at age 70, Social Security will reward you with the maximum monthly benefit based on your own earnings. So the longer you wait, the more money you'll receive each month. Now let's hear more details from Social Security thought leader Stephen Richardson. Stephen, can you share an example of how the age you claim your benefits affects the amount you receive? <v ->Sure, let's say you were born in 1960,</v> and you have a Primary Insurance Amount of $2,000. If you claim at 62, which is the earliest that you can claim, you'd receive 70% or $1,400 per month, and that reduction is permanent if you claim your benefits at 62. Your benefit would not go up when you reach Full Retirement Age. Now, the benefit increases for every month you wait to claim up to your Full Retirement Age, and at that point, your benefit would be $2,000, which is your Primary Insurance Amount. But, remember, you can get even more if you keep waiting. If you wait until age 70, which is the age you can get your highest retirement amount, your monthly benefit would be $2,480. You can see that the age you claim your retirement benefit has a significant effect on how much you collect each month for the rest of your life. In the example, the difference ranges between 1,400 a month and 2,480 per month, that's $12,960 more that you'll receive in Social Security benefits per year for the rest of your life. <v ->Thanks, Stephen.</v> As you can see, it pays to wait. You can get estimates of your benefit at different claiming ages, anytime between age 62 and age 70, using your my Social Security account. That will help you decide when to claim your Social Security retirement benefit. It's a big decision because, once you apply for your retirement benefit, the Social Security Administration will only allow you to change your mind within the first 12 months. You cannot change your mind after that. If you are within the first 12 months, you can withdraw your application, but you'll have to repay all the benefits you collected and start over later. Once you get to your 13th month, you're locked in and cannot withdraw your application. However, if you start collecting your retirement benefit and your between Full Retirement Age and age 70, you can voluntarily suspend your benefits to get a higher amount later, and you don't have to repay any benefits to suspend your payments. There's one last point I'd like to make about your claiming age. For those of you who are married and have a higher Social Security benefit than your spouse, the age that you claim your retirement benefit will affect the amount of the survivor benefit your spouse would receive in the event of your death. I know that it's not a fun topic to discuss, but it's important to think about. Now, generally speaking, the survivor benefit payable to your spouse is based on the amount you would be collecting if you were alive. So, if you took the reduced retirement benefit, the survivor benefit would also be reduced. If you waited to claim, you'd get a higher benefit and the survivor benefit would also increase. If you still have questions or need assistance, you can reach out to your local Social Security office by visiting ssa.gov/locator or calling 800-772-1213 and a representative can help you make an informed decision about your benefits. To find clear and comprehensive information about Social Security, check out this website. For additional information about other Social security topics and resources, visit learn.aarp.org/socialsecurity. While you're there, be sure to use the Your Questions Answered tool to browse frequently asked questions. If you don't see what you're looking for, you can submit your own question. Volunteer Certified Financial Planner professionals from the Foundation for Financial Planning will answer every question submitted with a personalized response within 10 days via private email. Thanks for watching. (upbeat music)

Social Security retirement benefits

qualify for benefits

my Social Security account

monthly benefit calculation

survivor benefit