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An individual becomes eligible to receive social security benefits by accumulating 40 social security credits. A maximum of 4 credits can be earned in a calendar year. Credits are obtained based upon annual earnings. In 2013, one credit is earned for each $1,160 of wages, so a person earning $4,640 in 2013, even if all of the wages are earned in one quarter, receives 4 social security credits for the year.

Once determined eligible to receive social security retirement benefits, average indexed monthly earnings (AIME) must be calculated. AIME is determined by averaging the 35 highest earnings years (adjusted for inflation) and then dividing by 12. If a person works less than 35 years, the missing years count as zeroes.

The next step in determining social security retirement benefits is calculating the primary insurance amount (PIA). The first $767 of AIME is multiplied by 90%, the next $3,857 of AIME is multiplied by 32%, and the amount over $4,624 of AIME is multiplied by 15%. The total is then added. The primary insurance amount is the retirement benefit an individual will receive at 

Full retirement age for individuals born between 1943 and 1954 is 66. Full retirement age will eventually reach age 67 for individuals born in 1960 or later. If an individual commences benefits prior to full retirement age, the PIA will be reduced based upon the number 
of months benefits are commenced prior to full retirement age. At age 62, the earliest age at which retirement benefits can be received, an individual will receive approximately 75% of the amount that would have been received at full retirement age. 

If an individual delays receiving benefits beyond full retirement age, delayed retirement credits are applied up to age 70. Delayed retirement credits increase the primary insurance amount by 8% simple interest each year, and are prorated monthly if delayed for less than a full year. By delaying receipt of retirement benefits until age 70, an individual can receive 132% of the amount they would have received at full retirement age. Individuals can file for retirement benefits based upon their own earnings record or that of their spouse. The maximum spousal benefit is equal to 50% of the other spouse’s primary insurance amount. If a spouse elects to receive a spousal benefit prior to attaining full retirement age, the benefit is reduced. Delayed retirement credits are not available with respect 

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Christopher J. Maurer, J.D., CFP® is a CERTIFIED FINANCIAL PLANNERTM in Bellaire, with over 20 years of experience. He can be reached at 713-667-4884 or www.parkplacefinancial.co. This material is intended for educational purposes only. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. Securities and advisory services offered through SagePoint Financial, Inc., member FINRA/SIPC. Insurance services offered through Park Place Financial, which is not affiliated with SagePoint Financial or registered as a broker-dealer or investment advisor. SagePoint Financial, Inc. does not offer tax or legal advice. Legal advice provided by Christopher J. Maurer. 6300 West Loop S, Suite 690, Bellaire, Texas 77401 (713) 667-4884.

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