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Redrick Terry: [Intro Music] It’s now time for 4 Your Money. We’re joined by Nate Kreinbrink of Nelson Corp Wealth Management. Nate, thanks for coming in.
Nate Kreinbrink: I appreciate it, Redrick. Thanks for having me.
Redrick Terry: Absolutely. We’re talking social security benefits. They play a large part in retirement. Uh, how are those benefits calculated?
Nate Kreinbrink: So, when we look at social security benefits, an individual’s benefit is calculated by taking the 35 highest years of earnings that they have. So if they’ve worked for 37 years and paid in for 37 years, their two lowest years are going to be thrown out. On the flip side, if someone only worked, uh, 33 years, and paid into it for those, they’re going to have a zero that’s calculated in there for those two remaining years. So, when they get your 35 highest years, they’re going to come up with your full retirement age benefit, or your primary insurance amount, PIA, it’s been called uh different things, but that’s the full amount of benefit that you’ll get at your full retirement age.
And then, so when people have that, when you claim for your benefits is also going to have a factor on how much you’re going to get. So, if you take your benefits early, the earliest that you can claim your own benefit is age 62, and uh, as oppose to delaying it all the way to age 70. So, if you take your benefit earlier, it’s going to be reduced. If you take a larger benefit and wait, you’re going to have an 8% increase every year past your full retirement age, up until age 70.
Redrick Terry: Yeah, I think you have a chart to show us, too that kind of illustrates some-
Nate Kreinbrink: Illustrates some of that, that we have. If we have, there it is, um so, take at this. If you have full retirement age benefits, if you’re born between 1943 and 1954 your full retirement age is 66 all the way up to, if you’re born in 1960 or later your full retirement age is 67. So let’s, for instance, take someone born in 1956. Their full retirement age is 66 and 4 months. That’s the amount that they’ll get a hundred per cent of their, um, primary insurance amount, as oppose to if they take it at 62, they’re going to take a 26.67 reduction in their benefit, and that’s locked in for life. As oppose to, on the flip side, if they delay that benefit up until age 70, they’re going to have a 29.33 per cent increase on their benefit, and again, we talk to people, would rather have – rather have a larger benefit or a smaller benefit locked in. Obviously we want the bigger benefit.
Redrick Terry: Absolute. I mean, there are a lot of options here. So, what options should people take? When should people claim those benefits?
Nate Kreinbrink: The magical question, huh?
Redrick Terry: [Laughs]
Nate Kreinbrink: When to take this? Uh, when we look at it, too, we also want to make sure that when people retire and when they take their social security benefit … it needs to be two separate decisions. A lot of times, people, hey I’m retiring today. I’m going to file for my benefit tomorrow. Well, that may not be the best decision for them. So, we want to make sure that we’re coordinating benefits with any spouses that we have, um, and trying to take one of those benefits and delaying it as close to age 70 as possible. Now, am I saying that someone needs to work all the way till 70? Absolutely not. But we want to make sure that we’re coordinating when we file for that benefit with some of our other assets that we have to, again, try to maximize that benefit, um, not only for us, but for any potential spouse, should that, uh, come about.
Redrick Terry: Important distinction to make there, Nate.
Nate Kreinbrink: Yes.
Redrick Terry: Thanks so much for joining us. We appreciate it.
Nate Kreinbrink: Thanks, Redrick, for having me.
Redrick Terry: Absolutely. And if you missed any of our discussion, we’ll make it available for you at our [Outro Music] website, OurQuadCities.com
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