Social Security FAQs

1. What is an 'Estimation Method' for Social Security benefits?

Social Security benefits that will be received in the future depend on a person's 'Primary Insurance Amount' (PIA). If you know this number, that is the most accurate method of estimating future benefits and how they differ depending on the claiming date. However, when someone doesn't know their PIA, it is possible to estimate claiming options using other estimation methods, such as by using someone's earnings history, current annual income, or a known benefit amount at 62 or another age.

2. What is "Full Retirement Age" (FRA) and how is it calculated?

Full retirement age (FRA), or what the Social Security Administration sometimes calls "Normal Retirement Age" (NRA), is the age at which a person's full "Primary Insurance Amount" (PIA) is available. Claiming before this date leads to reduced benefits. Claiming after this date leads to increased benefits through "deferral credits".

3. How does claiming before FRA affect benefit amounts?

A person's own benefit (based on their own work history) is reduced below their PIA amount by 5/9 of one percent for each month before FRA, up to 36 months. If the number of months before FRA exceeds 36, then the benefit is further reduced 5/12 of one percent per month. 

Spousal and survivor benefits are also reduced when taken before FRA, though the calculations differ. For example, spousal benefits are reduced by 25/36 of 1% for each month before FRA, up to 36 months. If the number of months before FRA exceeds 36, then the benefit is further reduced by 5/12 of 1% per month.

Survivor benefits have their own full retirement age and reduction rates that depend on the survivor's year of birth. Those who are born in 1962 or later reach full survivor retirement date at 67 and lose 0.339% of their benefit for each month before survivor FRA.

Those who claim benefits before FRA are also subject to benefit adjustments if they continue to have earned income (wages and/or self-employment income). The rules for these adjustments are complex. See How are Social Security benefits adjusted for earned income before FRA?  for details.

4. How does claiming after FRA affect benefits?

Those who claim benefits after FRA see an increase in their own benefits due to "deferral credits", earned each month that benefits are delayed. The amount of this credit depends on the year of birth, as in the table below.

These delay credits are applied monthly and are simple, based on PIA, not compounded. So, for example, if someone claimed 2.5 years (30 months) after FRA and has a PIA of $1000, they would have a benefit that is 8% * 2.5 = 20% higher than PIA, or $1200.

Spousal benefits and survivor benefits do not benefit from delay credits. So, if these benefits are claimed after FRA, they are in the same amount as would have been received if they were claimed at FRA.

5. Why does my plan show Social Security starting one month 'late'?

Each month's Social Security check is for the previous month's benefits. In other words, benefits are paid 'in arrears' and there is a one-month delay in receiving all benefit checks. This one-month delay affects all of the following:

1. First Social Security check is received one month after the claim month. So, if someone claims at age 62, they will receive their first check at age 62 and one month.
2. First full-benefit check for those claiming after FRA will be received in February. (Benefits for the year of claiming do not see the effects of all delay credits, as explained below.)
3. Annual cost-of-living adjustments (COLAs) are first seen in the February check.
4. First Spousal benefit check is received one month after the spouse claims benefits.
5. First Survivor benefit is for the month after death, so the first check is received two months after the spouse's death, if claimed as soon as possible.

Note that anyone whose birthday is on the first of the month will appear to receive their benefits not in arrears, but in the expected month. That's because these birthdays are special in Social Security calculations (see below for more).

6. How is being born on the first day of the month different for Social Security?

For Social Security purposes, those born on the first of the month are treated as having been born on the last day of the previous month. This will affect many aspects of Social Security, including timing of FRA. If a client was born on the first day of the month, you can mark this in the plan's Advanced Plan Settings, in the Social Security section.

7. Why could someone's benefits go up a bit a few months after claiming?

If someone claims Social Security benefits after their FRA, they benefit from "deferral credits", meaning their benefit is higher than it would have been at FRA. However, any deferral credits earned during the year that they claimed Social Security would not be credited until January of the following calendar year.

For example, if someone reached FRA in June 2026, but they claimed in June 2027 (one year later), they would have 12 months of deferral credits. However, their first check (which would be received in July 2026) would only reflect the deferral credits earned in 2026. Their full benefit amount, including all deferral credits from 2027, would not be recognized until January 2028 benefits, which are seen in the February 2028 check.

Note that this effect applies only to someone's own benefits. Spousal benefits and survivor benefits do not have delay credits. So, spousal or survivor benefits that begin after FRA would be the same as if they were claimed at FRA.

8. How are Spousal Benefits determined?

Spousal benefits are based on a person's "Spousal Primary Insurance Amount", or Spousal PIA. This is calculated as:

Spousal PIA = Spouse's PIA * 0.5 - Own PIA

That means only those people whose own PIA is less than 1/2 of their spouse's PIA will receive spousal benefits.

The amount of the benefit will depend on when the spousal benefit is claimed. Those who claim this benefit before their own FRA will receive a reduced benefit, and those reductions are greater than the reductions they would see in their own benefit for claiming before FRA. A spousal benefit is reduced 25/36 of one percent for each month before FRA, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced by 5/12 of one percent per month. 

However, while spousal benefits are reduced for early claiming, there is no benefit to deferring spousal benefits after FRA.

When someone is receiving both their own benefit (based on their own work history) and a spousal benefit (based on a spouse’s work history), the spousal benefit amount may be limited, even if claimed after FRA due to a cap that applies to “dual entitlements”. When claiming both own and spousal benefits, the spousal benefit cannot take the total benefit above 50% of the spouse’s PIA. For example, imagine Spouse A has a PIA of $3000 and Spouse B’s PIA is $1000. Spouse B’s own benefit at 70 would be $1240, with an additional $240 above the PIA of $1000 due to deferral credits from FRA to age 70. Spouse B is also eligible for a spousal benefit based on a Spousal PIA of $3000/2 - $1000 = $500. But is Spouse B were to be paid the full own and spousal benefits of $1240 + $500 = $1740, this would exceed 50% of Spouse A’s benefit ($1500). So, the spousal benefit (also called the “spousal supplement” or “spousal benefit payable”) is capped at $260, which brings the total benefit at 70 to $1240 + $260 = $1500. [SSA Example]

9. How are Survivor Benefits determined?

When one spouse dies, the surviving spouse is eligible for survivor benefits. If this benefit is higher than the surviving spouse's own benefit, Income Lab will show the increase in the plan. The survivor benefit is the greater of:

1. The deceased's benefit amount, reduced if the survivor benefit is taken before "Survivor FRA", which is not necessarily the same as the survivor's own-benefit FRA.
2. 82.5% of the deceased's PIA (or 100% of the deceased's PIA if the deceased had not yet claimed Social Security), reduced if the survivor benefit is taken before "Survivor FRA".

The second item above protects a surviving spouse somewhat from the effects of the deceased's decision to claim Social Security benefits long before FRA. This floor on benefits is referred to as the "Retirement Insurance Benefit Limitation (RIB-LIM)".

Unlike a person's own and spousal benefits, which can be taken at age 62, survivor benefits can be claimed as early as age 60.

Because of its relatively small size, Income Lab does not automatically include the Social Security lump-sum death benefit ($225 in 2025) in plans that include a spousal death.

10. When do Survivor Benefits start, and when does the deceased receive their last check?

No Social Security benefits are 'earned' in the month of death. Because benefits are paid in arrears, no benefits will be paid on a deceased's record in the month following death. This will lead to a one-month gap in benefits where neither spousal nor survivor benefits are paid in the month following the month of death.

For example, if a person dies in April, they will still receive and be able to keep the check they receive in that same month (since it is for March's benefits). However, if they received a check in May, that check would have to be returned because benefits cannot be received for the month of death. The same is true for any spousal benefit paid on the deceased's record: The spouse would be paid and be able to keep the payment received in April, but no spousal benefit is paid for April (received in May).

If there is a survivor benefit to be paid, the survivor can 'earn' a benefit in the month following the month of death. But, because no Social Security benefits are earned in the month of death, no survivor benefit is paid for the month of death. Therefore, no survivor benefit would be received in the month following death. The first check for a survivor benefit would be received in the month thereafter (two months after the month of death). In practice, this means there may be a dip in benefits in the month following the month of death. If the surviving spouse has a PIA of $0, the dip could be all the way to $0, with the survivor benefit starting the following month.

11. When are Social Security cost-of-living adjustments (COLAs) applied?

Social Security COLAs apply to benefits in January of each year by applying a published inflation rate and rounding to the nearest dollar. (Before 2000, benefits were rounded down to the nearest dime after application of the COLA.) Due to the one-month lag between benefits and checks, this means they affect the February check. In plans that are being tracked and monitored, Income Lab will automatically apply COLAs in January and show them beginning in February.

Note that both people who are receiving benefits and those who will receive benefits are affected by COLAs. That's because COLAs are applied to PIAs, including the PIA of those who have not started benefits.

12. How does 'Opportunity Cost' (time value of money) affect Income Lab Social Security?

A dollar today is worth more than a dollar tomorrow (or in a year, 10 years, etc.). This concept is the basis behind the 'time value of money'. In evaluating 'break-even points' and lifetime benefits, you can elect to include an 'Opportunity Cost' (discount rate) that will be used to 'discount' future Social Security benefits. For example, if the interest rate is 5%, $100 of benefits received one year from today will only 'count' as $95 in present value.

Time-value-of-money calculations are applied to 'real' benefits, meaning benefits in today's dollars. This means that assumed inflation is also removed from break-even and total lifetime benefit calculations.

Time-value-of-money calculations and adjustments are used only in present value/net present value calculations. Therefore, they do not affect the benefits shown in the plan. Therefore, a change in Opportunity Cost (discount rate) will not change a plan's Spending Capacity ("Retirement Paycheck") or any other plan values. It will only change measures of total benefits and break-even points.

For more information and examples of discounting and opportunity cost, please see What is 'Opportunity Cost' for Social Security?

13. How are break-even points (dates, ages) calculated?

Many people would like to know whether delaying the claiming of Social Security is 'worth it'. One way to evaluate this is to ask when the person would 'break even' with the benefits they receive when delaying claiming as compared to the soonest they could claim. Income Lab's break-even point calculations do exactly this: compare the selected claiming strategy to a strategy of claiming as soon as possible. If you have elected to include time-value-of-money discounting by applying a non-zero Opportunity Cost to these calculations, the breakeven point will reflect time-value-of-money discounting.

Note that, in a joint plan with two Social Security benefits, the break-even date is based on both spouses' selected claiming date compared to the earliest each spouse could claim benefits. So, the break-even date will be the same for both clients (though the break-even ages could of course be different if the spouses have different dates of birth).

For more information, please see How are break-even points calculated?

14. Will Social Security benefits be cut in the future?

We do not know with any certainty what the future of the Social Security program looks like. Changes to the program have been made in the past, and many clients are concerned about the impact of possible future changes. In order to allow advisors to address these concerns, Income Lab allows modeling of hypothetical future benefit cuts in a plan. You can do this in the Advanced Plan Settings > Social Security section. Here you can set the year and benefit reduction percentage for the plan, and the software will do the rest. The default setting in the software will model a 21% benefit cut starting in 2033, based on the 2025 Trustee report. For more on the Social Security program and projections of benefit cuts, see the Social Security Administration's Trustee Report.