{ "id": "R43542", "type": "CRS Report", "typeId": "REPORTS", "number": "R43542", "active": true, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 624696, "date": "2020-05-13", "retrieved": "2020-05-19T13:40:30.240206", "title": "How Social Security Benefits Are Computed: In Brief", "summary": "Social Security, the largest program in the federal budget (in terms of outlays), provides monthly cash benefits to retired or disabled workers and their family members as well as to the family members of deceased workers. In 2019, benefit outlays were approximately $1,048 billion, with roughly 64 million beneficiaries and 178 million workers in Social Security-covered employment. Under current law, Social Security\u2019s revenues are projected to be insufficient to pay full scheduled benefits after 2035.\nMonthly benefit amounts are determined by federal law. Social Security is of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policymakers have considered numerous proposals to change its benefit computation rules.\nThe Social Security benefits that are paid to worker beneficiaries and to workers\u2019 dependents and survivors are based on workers\u2019 past earnings. The computation process involves three main steps\nFirst, a summarized measure of lifetime earnings is computed. That measure is called the average indexed monthly earnings (AIME).\nSecond, a benefit formula is applied to the AIME to compute the primary insurance amount (PIA). The benefit formula is progressive. As a result, workers with higher AIMEs receive higher Social Security benefits, but the benefits received by people with lower earnings replace a larger share of past earnings.\nThird, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving payments. For retired workers who claim benefits at the full retirement age (FRA) and for disabled workers, the monthly benefit equals the PIA. Retired workers who claim earlier receive lower monthly benefits, and those who claim later receive higher benefits.\nRetired worker benefits can be affected by other adjustments. For example, the windfall elimination provision (WEP) can reduce benefits for individuals who receive a pension from non-Social Security-covered earnings, and benefits can be withheld under the retirement earnings test (RET) if an individual continues to work and earns above a certain amount. Although not an adjustment, Social Security benefits can be subject to income tax, thereby affecting the beneficiary\u2019s net income.\nBenefits for eligible dependents and survivors are based on the worker\u2019s PIA. For example, a dependent spouse receives a benefit equal to 50% of the worker\u2019s PIA, and a widow(er) receives a benefit equal to 100% of the worker\u2019s PIA. Dependent benefits may also be adjusted based on the age at which they are claimed and other factors.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/R43542", "sha1": "9cb8d4ed929dd85ad7e7cdd2b87bd8bbda99c082", "filename": "files/20200513_R43542_9cb8d4ed929dd85ad7e7cdd2b87bd8bbda99c082.html", "images": { "/products/Getimages/?directory=R/html/R43542_files&id=/0.png": "files/20200513_R43542_images_daadae655ebfca010848d98f2026462fa7460ecd.png", "/products/Getimages/?directory=R/html/R43542_files&id=/1.png": "files/20200513_R43542_images_748e2d4fbe366a6b36d6628963b8144ba631327d.png" } }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/R43542", "sha1": "a248acbb609155b3e0c03505d89b6021cd0c3fc1", "filename": "files/20200513_R43542_a248acbb609155b3e0c03505d89b6021cd0c3fc1.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4796, "name": "Social Security" } ] }, { "source": "EveryCRSReport.com", "id": 597928, "date": "2019-05-03", "retrieved": "2019-12-20T19:18:29.547205", "title": "How Social Security Benefits Are Computed: In Brief", "summary": "Social Security, the largest program in the federal budget (in terms of outlays), provides monthly cash benefits to retired or disabled workers and their family members as well as to the family members of deceased workers. In 2018, benefit outlays were approximately $989 billion, with roughly 63 million beneficiaries and 176 million workers in Social Security-covered employment. Under current law, Social Security\u2019s revenues are projected to be insufficient to pay full scheduled benefits after 2035.\nMonthly benefit amounts are determined by federal law. Social Security is of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policymakers have considered numerous proposals to change its benefit computation rules.\nThe Social Security benefits that are paid to worker beneficiaries and to workers\u2019 dependents and survivors are based on workers\u2019 past earnings. The computation process involves three main steps\nFirst, a summarized measure of lifetime earnings is computed. That measure is called the average indexed monthly earnings (AIME).\nSecond, a benefit formula is applied to the AIME to compute the primary insurance amount (PIA). The benefit formula is progressive. As a result, workers with higher AIMEs receive higher Social Security benefits, but the benefits received by people with lower earnings replace a larger share of past earnings.\nThird, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving payments. For retired workers who claim benefits at the full retirement age (FRA) and for disabled workers, the monthly benefit equals the PIA. Retired workers who claim earlier receive lower monthly benefits, and those who claim later receive higher benefits.\nRetired worker benefits can be affected by other adjustments. For example, the windfall elimination provision can reduce benefits for individuals who receive a pension from non-Social Security-covered earnings, and benefits can be withheld under the retirement earnings test if an individual continues to work and earns above a certain amount. Although not an adjustment, Social Security benefits can be subject to income tax, thereby affecting the beneficiary\u2019s net income.\nBenefits for eligible dependents and survivors are based on the worker\u2019s PIA. For example, a dependent spouse receives a benefit equal to 50% of the worker\u2019s PIA, and a widow(er) receives a benefit equal to 100% of the worker\u2019s PIA. Dependent benefits may also be adjusted based on the age at which they are claimed and other factors.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/R43542", "sha1": "1258d9d9863f312ceb2175c162fcbc48c8a234b8", "filename": "files/20190503_R43542_1258d9d9863f312ceb2175c162fcbc48c8a234b8.html", "images": { "/products/Getimages/?directory=R/html/R43542_files&id=/0.png": "files/20190503_R43542_images_40bbda5ab93d2f0bbeacb7157bca5279b8a2ba65.png", "/products/Getimages/?directory=R/html/R43542_files&id=/1.png": "files/20190503_R43542_images_748e2d4fbe366a6b36d6628963b8144ba631327d.png" } }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/R43542", "sha1": "257f0647691dffda94daf4798deaf233b781f355", "filename": "files/20190503_R43542_257f0647691dffda94daf4798deaf233b781f355.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4796, "name": "Social Security" } ] }, { "source": "EveryCRSReport.com", "id": 582455, "date": "2018-06-28", "retrieved": "2018-07-03T13:09:44.724746", "title": "How Social Security Benefits Are Computed: In Brief", "summary": "Social Security, the largest program in the federal budget (in terms of outlays), provides monthly cash benefits to retired or disabled workers and their family members as well as to the family members of deceased workers. In 2017, benefit outlays were approximately $952 billion, with roughly 62 million beneficiaries and 174 million workers in Social Security-covered employment. Under current law, Social Security\u2019s revenues are projected to be insufficient to pay full scheduled benefits after 2034.\nMonthly benefit amounts are determined by federal law. Social Security is of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policymakers have considered numerous proposals to change its benefit computation rules.\nThe Social Security benefits that are paid to worker beneficiaries and to workers\u2019 dependents and survivors are based on workers\u2019 past earnings. The computation process involves three main steps:\nFirst, a summarized measure of lifetime earnings is computed. That measure is called the average indexed monthly earnings (AIME).\nSecond, a benefit formula is applied to the AIME to compute the primary insurance amount (PIA). The benefit formula is progressive. As a result, workers with higher AIMEs receive higher Social Security benefits, but the benefits received by people with lower earnings replace a larger share of past earnings.\nThird, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving payments. For retired workers who claim benefits at the full retirement age (FRA) and for disabled workers, the monthly benefit equals the PIA. Retired workers who claim earlier receive lower monthly benefits, and those who claim later receive higher benefits.\nRetired worker benefits can be affected by other adjustments. For example, the windfall elimination provision can reduce benefits for individuals who receive a pension from non-Social Security-covered earnings, and benefits can be withheld under the retirement earnings test if an individual continues to work and earns above a certain amount. Although not an adjustment, Social Security benefits can be subject to income tax, thereby affecting the beneficiary\u2019s net income.\nBenefits for eligible dependents and survivors are based on the worker\u2019s PIA. For example, a dependent spouse receives a benefit equal to 50% of the worker\u2019s PIA, and a widow(er) receives a benefit equal to 100% of the worker\u2019s PIA. Dependent benefits may also be adjusted based on the age at which they are claimed and other factors.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43542", "sha1": "a6a49a1e4e065068079edc9e0dbd0ceb234929e5", "filename": "files/20180628_R43542_a6a49a1e4e065068079edc9e0dbd0ceb234929e5.html", "images": { "/products/Getimages/?directory=R/html/R43542_files&id=/0.png": "files/20180628_R43542_images_c83f80ff8f86ee0aeeee6d68e80e59b06d87c73f.png", "/products/Getimages/?directory=R/html/R43542_files&id=/1.png": "files/20180628_R43542_images_748e2d4fbe366a6b36d6628963b8144ba631327d.png" } }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43542", "sha1": "7470bdd6a738998a4a4806b1b0fb3c21433040c4", "filename": "files/20180628_R43542_7470bdd6a738998a4a4806b1b0fb3c21433040c4.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4796, "name": "Social Security" } ] }, { "source": "EveryCRSReport.com", "id": 456699, "date": "2016-10-27", "retrieved": "2016-10-28T18:17:29.326936", "title": "How Social Security Benefits Are Computed: In Brief", "summary": "Social Security, the largest program in the federal budget (in terms of outlays), provides monthly cash benefits to retired or disabled workers and their family members as well as to the family members of deceased workers. In 2015, benefit outlays were approximately $900 billion, with roughly 60 million beneficiaries and 169 million workers in Social Security-covered employment. Under current law, Social Security\u2019s revenues are projected to be insufficient to pay full scheduled benefits after 2034.\nMonthly benefit amounts are determined by federal law. Social Security is of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policy makers have considered numerous proposals to change its benefit computation rules.\nThe Social Security benefits that are paid to worker beneficiaries and to workers\u2019 dependents and survivors are based on workers\u2019 past earnings. The computation process involves three main steps:\nFirst, a summarized measure of lifetime earnings is computed. That measure is called the average indexed monthly earnings (AIME).\nSecond, a benefit formula is applied to the AIME to compute the primary insurance amount (PIA). The benefit formula is progressive. As a result, workers with higher AIMEs receive higher Social Security benefits, but the benefits received by people with lower earnings replace a larger share of past earnings.\nThird, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving payments. For retired workers who claim benefits at the full retirement age (FRA), which is currently 66, and for disabled workers, the monthly benefit equals the PIA. Retired workers who claim earlier receive lower monthly benefits, and those who claim later receive higher benefits.\nRetired worker benefits can be affected by other adjustments. For example, the windfall elimination provision can reduce benefits for individuals who receive a pension from non-Social Security-covered earnings, and benefits can be withheld under the retirement earnings test if an individual continues to work and earns above a certain amount. Although not an adjustment, Social Security benefits can be subject to income tax, thereby affecting the beneficiary\u2019s net income.\nBenefits for eligible dependents and survivors are based on the worker\u2019s PIA. For example, a dependent spouse receives a benefit equal to 50% of the worker\u2019s PIA, and a widow(er) receives a benefit equal to 100% of the worker\u2019s PIA. Dependent benefits may also be adjusted based on the age at which they are claimed and other factors.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43542", "sha1": "6cb108a03255165de70821072ceda75d239defe8", "filename": "files/20161027_R43542_6cb108a03255165de70821072ceda75d239defe8.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43542", "sha1": "e14728dc3ad612cc0ae69bdf64d55c28b6eb6c41", "filename": "files/20161027_R43542_e14728dc3ad612cc0ae69bdf64d55c28b6eb6c41.pdf", "images": null } ], "topics": [ { "source": "IBCList", "id": 4796, "name": "Social Security" } ] }, { "source": "EveryCRSReport.com", "id": 444270, "date": "2015-02-04", "retrieved": "2016-04-06T19:32:50.884858", "title": "How Social Security Benefits Are Computed: In Brief", "summary": "Congressional Research Service\n7-5700\nwww.crs.gov\nR43542\nSummary\nWith about $900 billion in benefit outlays projected to be made in 2015, Social Security is the largest program in the federal budget. It provides monthly cash benefits to retired and disabled workers and their family members as well as to the family members of deceased workers. Currently, there are about 59 million beneficiaries. Under current law, Social Security\u2019s revenues are projected to be insufficient to pay full scheduled benefits after 2033.\nMonthly benefit amounts are determined by federal law. Social Security is an issue of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policy makers have considered numerous proposals to change its benefit computation rules.\nThe Social Security benefits that are paid to worker beneficiaries and to workers\u2019 dependents and survivors are based on workers\u2019 past earnings. The computation process involves three main steps:\nFirst, a summarized measure of lifetime earnings is computed. That measure is called the average indexed monthly earnings (AIME).\nSecond, a benefit formula is applied to the AIME to compute the primary insurance amount (PIA). The benefit formula is progressive. As a result, workers with higher AIMEs receive higher Social Security benefits, but the benefits received by people with lower earnings replace a larger share of past earnings.\nThird, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving payments. For retired workers who claim benefits at the full retirement age (FRA), which is currently 66, and for disabled workers, the monthly benefit equals the PIA. Retired workers who claim earlier receive lower monthly benefits, and those who claim later receive higher benefits.\nBenefits for eligible dependents and survivors are based on the worker\u2019s PIA. For example, a dependent spouse receives a benefit equal to 50% of the worker\u2019s PIA, and a widow(er) receives a benefit equal to 100% of the worker\u2019s PIA. Dependent benefits may also be adjusted based on the age at which they are claimed.\nContents\nIntroduction\t1\nEligibility\t1\nAverage Indexed Monthly Earnings\t2\nWage Indexing\t2\nAveraging Indexed Earnings\t2\nPrimary Insurance Amount\t2\nWage Indexing Results in Stable Replacement Rates\t4\nCost-of-Living Adjustment\t4\nHow Timing of Benefit Claim Affects Benefit Levels\t4\nFull Retirement Age\t4\nAdjustments for Early and Late Benefit Claim\t5\nDependent Benefits\t6\nOther Adjustments to Benefits\t7\n\nFigures\nFigure 1. Computation of a Worker\u2019s Primary Insurance Amount (PIA) in 2015\t3\nFigure 2. Monthly Retirement Benefit by Claim Age\t6\n\nTables\nTable 1. Computation of a Worker\u2019s Primary Insurance Amount (PIA) in 2015 Based on an Illustrative AIME of $6,000\t3\nTable 2. Full Retirement Age (FRA) by Year of Birth\t4\n\nContacts\nAuthor Contact Information\t7\n\nIntroduction\nSocial Security, which is projected to pay about $900 billion in benefits in 2015, is the largest program in the federal budget. There are currently about 59 million Social Security beneficiaries. \nMost Social Security beneficiaries are retired and disabled workers, whose monthly benefits depend on their past earnings, their age, and other factors. Benefits are also paid to workers\u2019 dependents and survivors. Dependent and survivors benefits are based on the earnings of the workers upon whose work record they claim.\nSocial Security has an important impact on beneficiaries, both young and old, in terms of income support and poverty reduction. However, under current law, Social Security\u2019s revenues are projected to be insufficient to pay full scheduled benefits after 2033. For both of those reasons, Social Security is an issue of ongoing interest to policy makers. Most proposals to change Social Security outlays would change the benefit computation rules. Evaluating such proposals requires an understanding of how benefits are computed under current law.\nEligibility\nA person who has a sufficient history of earnings in employment subject to Social Security payroll taxes becomes \u201cinsured\u201d for Social Security, which makes the worker and qualified dependents eligible for benefits. Insured status is based on the number of \u201cquarters of coverage\u201d (QCs) earned. In 2015, a worker earns one QC for each $1,220 of earnings, and a worker may earn up to four QCs per calendar year. The amount needed for a QC increases annually by the growth in average earnings in the economy, as measured by Social Security\u2019s average wage index.\nTo be eligible for most benefits, workers must be \u201cfully insured,\u201d which requires one QC for each year elapsed after the worker turns 21 years old, with a minimum of 6 QCs and a maximum of 40 QCs. A worker is first eligible for Social Security retirement benefits at 62, so to be eligible for retirement benefits, a worker must generally have worked for 10 years.\nBenefits may be paid to eligible survivors of workers who were fully insured at the time of death. Some dependents are also eligible if the deceased worker was \u201ccurrently insured,\u201d which requires earning 6 QCs in the 13 quarters ending with the quarter of death. \nTo be eligible for disability benefits, workers must also satisfy a recency of work requirement. Workers aged 31 and older must have earned 20 QCs in the 10 years before becoming disabled. Fewer QCs are required for younger workers.\nAverage Indexed Monthly Earnings\nThe first step of computing a benefit is determining a worker\u2019s average indexed monthly earnings (AIME), a measure of a worker\u2019s past earnings.\nWage Indexing\nRather than using the amounts earned in past years directly, the AIME computation process first updates past earnings to account for growth in overall economy-wide earnings. That is done by increasing each year of a worker\u2019s taxable earnings after 1950 by the growth in average earnings in the economy, as measured by Social Security\u2019s average wage index, from the year of work until two years before eligibility for benefits, which for retired workers is at 62. For example, the Social Security average wage grew from $32,155 in 2000 to $41,674 in 2010. So if a worker earned $20,000 in 2000 and turned 60 in 2010, the indexed wage for 2000 would be $20,000 x ($41,674 / $32,155), or $25,921. Earnings from later years\u2014for retired workers, at ages 61 and above\u2014are not indexed.\nAveraging Indexed Earnings\nFor retired workers, the AIME equals the average of the 35 highest years of indexed earnings, divided by 12 (to change from an annual to a monthly measure). Those years of earnings are known as computation years. If the person worked fewer than 35 years in employment subject to Social Security payroll taxes, the computation includes some years of zero earnings. For example, benefits for workers who immigrated to the United States may be based only on their earnings in the United States and could include zero earnings for years before they immigrated, even if they had earnings in another country. \nIn the case of workers who die before turning 62 years old, the number of computation years is generally reduced below 35 by the number of years until he or she would have reached 62. For example, the AIME for a worker who died at 61 is based on 34 computation years.\nFor disabled workers, the number of computation years depends primarily on the age at which they become disabled, increasing from two years for those aged 24 or younger to 35 years for those aged 62 or older. \nPrimary Insurance Amount\nThe next step in determining a benefit is to compute the primary insurance amount (PIA) by applying a benefit formula to the AIME. \nFirst, the AIME is sectioned into three brackets (or segments) of earnings, which are divided by dollar amounts known as bend points. In 2014, the bend points are $816 and $4,917. Those amounts are indexed to the average wage index, so they generally increase each year. \nThree factors, which are fixed by law at 90%, 32%, and 15%, are applied to the three brackets of AIME. For workers with AIMEs of $816 or less in 2014, the PIA is 90% of the AIME. Because the other two factors are lower, that share declines as AIMEs increase, which makes the benefit formula progressive. For workers who become eligible for retirement benefits, become disabled, or die in 2014, the PIA is determined as shown in the example in Table 1 and in Figure 1.\nTable 1. Computation of a Worker\u2019s Primary Insurance Amount (PIA) in 2015 Based on an Illustrative AIME of $6,000\nFactors\nThree Brackets of AIME\nPIA for Worker with an Illustrative AIME of $5,000\n\n90%\nfirst $826 of AIME, plus\n$743.40\n\n32%\nAIME over $826 and through $4,980, plus\n$1,329.28\n\n15%\nAIME over $4,980\n$153.00\n\nTotal: Worker\u2019s PIA (by law, rounded down to nearest 10 cents)\n$2,225.60\n\nSource: The Congressional Research Service.\nFigure 1. Computation of a Worker\u2019s Primary Insurance Amount (PIA) in 2015 \n\nSource: The Congressional Research Service (CRS).\nWage Indexing Results in Stable Replacement Rates\nIn the AIME computation, earnings are indexed to the average wage index, and the bend points in the benefit formula are indexed to growth in the average wage index. As a result, replacement rates\u2014the portion of earnings that benefits replace\u2014remain generally stable. That is, from year to year, the average benefits that new beneficiaries receive increase at approximately the same rate as average earnings in the economy.\nCost-of-Living Adjustment\nA cost-of-living adjustment (COLA) is applied to the benefit beginning in the second year of eligibility, which for retired workers is age 63. The COLA applies even if a worker has not yet begun to receive benefits. The COLA usually equals the growth in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one calendar year to the third quarter of the next year. For example, beneficiaries received a COLA of 1.5% for benefits paid in January 2015 because the CPI-W increased by 1.7% between the third quarter of 2013 and the third quarter of 2014. \nHow Timing of Benefit Claim Affects Benefit Levels\nFull Retirement Age\nThe full retirement age (FRA, also called the normal retirement age) is the age at which a worker can receive the full PIA, increased by any COLAs. The FRA was 65 for people born before 1938, but the Social Security Amendments of 1983 (P.L. 98-21) raised the FRA for those born later, as shown in Table 2.\nTable 2. Full Retirement Age (FRA) by Year of Birth\nYear of Birth\nYear Turning 62\nFull Retirement Age\n\n1937 or earlier\n1999 or earlier\n65\n\n1938\n2000\n65 and 2 months\n\n1939\n2001\n65 and 4 months\n\n1940\n2002\n65 and 6 months\n\n1941\n2003\n65 and 8 months\n\n1942\n2004\n65 and 10 months\n\n1943-1954\n2005-2016\n66\n\n1955\n2017\n66 and 2 months\n\n1956\n2018\n66 and 4 months\n\n1957\n2019\n66 and 6 months\n\n1958\n2020\n66 and 8 months\n\n1959\n2021\n66 and 10 months\n\n1960 or later\n2022 or later\n67\n\nSource: Social Security Administration, Office of the Chief Actuary, \u201cNormal Retirement Age,\u201d at http://www.ssa.gov/OACT/progdata/nra.html.\nAdjustments for Early and Late Benefit Claim\nRetired workers may claim benefits when they turn 62 years old, but the longer that they wait, the higher their monthly benefit. The higher monthly benefit is intended to offset the fewer number of payments that people who delay claim will receive over their lifetimes, so that the total value of lifetime benefits is approximately the same regardless of when they claim.\nThe permanent reduction in monthly benefits that applies to people who claim before the FRA is called an actuarial reduction. It equals 6% per year for the first three years of early claim and 5% for additional years. \nThe permanent increase in monthly benefits that applies to those who claim after the FRA is called the delayed retirement credit. For people born in 1943 and later, that credit is 8% for each year of delayed claim after the FRA, up to age 70. \nFor people with an FRA of 66, therefore, monthly benefits are 75% of the PIA for those who claim benefits at the age of 62 and 132% of the PIA for people who wait until the age of 70 to claim (see Figure 2). Because people who claim earlier receive more payments over a lifetime, the overall effect of claiming at different ages depends on how long the beneficiary lives. For example, someone who dies at 71 years old would be better off claiming early, but someone who survives to 95 would be better off claiming late.\nFigure 2. Monthly Retirement Benefit by Claim Age\nPercentage of Primary Insurance Amount (PIA), for People with a Full Retirement Age of 66\n\nSource: CRS.\nAn increase in the FRA results in lower benefits regardless of when they are claimed. Depending on the claim age, the scheduled increase in the FRA from 66 to 67 will reduce monthly benefits by between 6.1% and 7.7%. For example, people who have an FRA of 66 and who claim at age 62 receive a benefit equal to 75% of the PIA. But when the FRA increases to 67, claiming at 62 will result in a benefit of 70% of the PIA.\nDependent Benefits\nSocial Security benefits are payable to the spouse, divorced spouse, or child of a retired or disabled worker and to the widow(er), divorced widow(er), child, or parent of a deceased worker. When dependent beneficiaries also earned worker benefits, they receive the larger of the worker or the dependent benefit.\nA spouse\u2019s base benefit (that is, before any adjustments) equals 50% of the worker\u2019s PIA. A widow(er)\u2019s base benefit is 100% of the worker\u2019s PIA. The base benefit for children of a retired or disabled worker is 50% of the worker\u2019s PIA, and the base benefit for children of deceased workers is 75% of the worker\u2019s PIA. \nOther Adjustments to Benefits\nOther benefit adjustments apply in certain situations, notably \nthe windfall elimination provision (WEP), which reduces benefits for worker beneficiaries who have pensions from employment that was not subject to Social Security payroll taxes;\nthe government pension offset (GPO), which reduces Social Security spousal benefits paid to people who have pensions from employment that was not subject to Social Security payroll taxes;\nthe retirement earnings test, which delays monthly Social Security benefits paid to beneficiaries who are younger than the full retirement age and have earnings above a certain level; and\nthe maximum family benefit, which limits the amount of benefits payable to a family.\nIn some cases, a portion of Social Security benefits may be subject to income tax. Taxation is not a benefit adjustment, but it does affect the net income of beneficiaries. For additional information, see CRS Report RL32552, Social Security: Calculation and History of Taxing Benefits, by Noah P. Meyerson.\n\nAuthor Contact Information\n\nKatelin P. Isaacs\nAnalyst in Income Security\nkisaacs@crs.loc.gov, 7-7355", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43542", "sha1": "c1bd90320eea3b8133c59b0b3b3c3289fc819651", "filename": "files/20150204_R43542_c1bd90320eea3b8133c59b0b3b3c3289fc819651.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43542", "sha1": "f3279b42adb2ab8bc69a2bd26ff4654cab154f83", "filename": "files/20150204_R43542_f3279b42adb2ab8bc69a2bd26ff4654cab154f83.pdf", "images": null } ], "topics": [ { "source": "IBCList", "id": 328, "name": "Social Security" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc306533/", "id": "R43542_2014May12", "date": "2014-05-12", "retrieved": "2014-07-08T21:53:44", "title": "How Social Security Benefits Are Computed: In Brief", "summary": "This report discusses how Social Security benefits are currently computed, including information about eligibility, earnings, cost-of-living adjustments, factors that can affect benefit levels, and benefits for dependents.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20140512_R43542_cf2f609197387f06224e6f12d554a3dea92fbc3b.pdf" }, { "format": "HTML", "filename": "files/20140512_R43542_cf2f609197387f06224e6f12d554a3dea92fbc3b.html" } ], "topics": [ { "source": "LIV", "id": "Social security", "name": "Social security" }, { "source": "LIV", "id": "Social security beneficiaries", "name": "Social security beneficiaries" }, { "source": "LIV", "id": "Social security numbers", "name": "Social security numbers" } ] } ], "topics": [ "Domestic Social Policy" ] }