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Percentage Deduction for Early Retirement

According the the annual social security statement I just received, the estimated benefit at age 63 is only 15.9% less than the estimated benefit at age 66. I would have expected a 20% deduction.

I then went on line and used the benefit calculator to double check the numbers. In this case, the age 63 benefit was only 15.4% less than the full benefit amount. Further, I ran scenarios starting benefits at 64 and 65. The deductions were 14.3% and 7.7% versus the expected 13.3% and 6.7%.

What am I missing? Have others observed similar discrepancies?

I will be turning 64 in November and am trying to decide when to begin collecting my social security benefit.

Updated : September 10, 2012 by Guest

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Percentage deduction for early retirement

September 10, 2012 by David Luhman

Social Security retirement benefits are cut on a percentage basis if you retire early. But the percentage cut is done on a MONTHLY basis. You seem to be "rounding" the percentage deduction to the nearest whole year.

See the following link :

It gives a 20 percent reduction IF you retire at age 63 and 0 months. But if you retire at age 63 and 9 months, there is only 15 percent reduction in the benefit.

Percentage Deduction for Early Retirement

September 11, 2012 by Guest

Thanks for your quick reply. If the annual statement I just received takes into account that I am am already older than 63, that would explain why the age 63 estimate is higher than expected.

Does the estimate for FRA include an assumed cost of living adjustment? If so, that would explain why the deductions for age 64 and 65 using the on-line calculater were slightly higher than I expected. My calculations were using 5/9% per month for 12 and 24 months respectively.

Thanks again.

Slightly increasing "monthly bonus" for delayed retirement

September 11, 2012 by David Luhman

Yes, if you'll note in the table at, under the "Wage Earner" column, the monthly benefit increase you receive at age 62 is about 0.42 percent, while the monthly benefit increase is about 0.55 percent at age 65.

I am not sure of the cause of this difference, but there may be an assumed cost of living adjustment (COLA) or similar time-value-of-money factor in their figures.


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