Your Social Security benefit is based on your Primary Insurance Amount (PIA).
Your PIA is based on your Average Indexed Monthly Earnings (AIME).
However you can reduce or increase your PIA by retiring before or after your FRA (Full Retirement Age).
Having fun yet?
And it gets better. The longer you wait to apply for benefits after your FRA the more Delayed Earnings Credits (DEC) you will get.
So, to wrap it up in simplest terms, if you wait beyond your FRA, you’ll receive DEC’s that will increase your benefit above your PIA, which was derived from your AIME! Whew!
Clear as mud, right?
Okay, but while this is funny, in a silly way, these acronyms are no joke.
They literally will affect you for the rest of your life and potentially even your surviving spouse’s life as well.
So having an understanding of these terms and how they affect you is critically important.
Your PIA is simply the amount of Social Security benefit you will receive when you file for benefits at your Full Retirement Age.
Let’s say you were born before 1955. Your FRA is 66 years old.
If you file for benefits at 66 you will receive 100% of your PIA. If you file for benefits before 66, you will receive a reduced benefit, reduced as much as 25% if you file at the earliest age of 62.
If you file for benefits at age 70, you will receive 32% more benefits due to the Delayed Earnings Credits.
To make it simple. If your PIA amount is $1000 a month, you will get $1000 at 66, $750 if you file at 62 and $1320 if you file at 70.
In other videos we will discuss strategies to maximize your benefits. But in this video the goal was just to give you an understanding of how Social Security benefits work and the acronyms that are involved.