Hello again. I'm Tony Kinzer. And I'm glad you're here with me. In this lesson Module Three, lesson two and yes, I know I think I said module two lesson two as we ended the last lesson. Anyway, here in Module Three lesson two, we'll we're going to start exploring some ideas to help you decide when to claim your Social Security benefits. But before we get anywhere near that step, you need a familiarity with the language and terminology of Social Security.

If you have any hope of navigating through the system, these terminology and acronyms are have to become familiar to you. Some of you younger students will choose to ignore this section on Social Security, you may think it's too far down the road to worry about. However, if you have parents or other relatives approaching Social Security age, it will help you help them and perhaps avoid some mistakes. With people living longer and longer. There's a growing chance that eventually you'll be responsible for your parents care, especially if they have no money. To the extent possible, it's in your best interest to help them make good financial decisions.

Something overlooked is that the Social Security Administration does allow everyone at one time do over. If you change your mind want to stop your benefits and then start over again later you can. However, it has to be done within 12 months of accepting your first payment, and you have to pay back every dime they sent you. You don't lose the money, it's simply added back to the pot and results in a fractionally larger check when you file the second time. But even that has a catch. What happens if something happens to you before before you start over and don't live to reapply?

The money you returned is gone forever? Or is it? The lexicon and terminology used by the Social Security system can be overwhelming at first? There's a lot of it. And if you're new to this, it's a source of much confusion. What follows is far from an exhaustive glossary.

So beware. The first one is As our average monthly earnings this number is determined by dividing total earnings in the computation years by the number of months in those same years. computation years are the 35 highest years of earnings used to compute retirement benefits. If you have 45 years of earnings history, the calculation isolates the 35 highest years, even so, there may be some zeros in the mix, years that you didn't work. Or if someone failed to send in your money, those zeros still get averaged in credits. These are the quarters of coverage where you've paid into the system.

And unless you're trying to qualify for disability benefits, you need a minimum of 40 credits to be eligible for retirement benefit fra or full retirement age. This is the age at which you become entitled to full or unreduced benefits based on age. For most of you here in the course. It's close to to age 67 p i A, this is the dollar amount associated with your fr a and your ama, it's the amount you would start to receive as a monthly benefit based upon your earnings history. early retirement, you can elect to claim retirement benefits as soon as you turn 62. However, if you do, your benefit will be permanently reduced by 30% which will prove significant if you don't die early.

Your f ra is 100%. And anything sooner than your F ra results in a reduction of that number, and it's a permanent reduction. If you have higher earnings years when you're 6364 65, etc. Those higher earnings years numbers will not get added in because once you file and cash your first check, you're committed for the rest of your life except for the one time do over. I'll say it now and I'll say it again. You need to find a way to To wait to claim until your F RA, if you have a terminal illness, okay, that's a new variable.

But absent something dramatic like that you should wait. For example, I have a 63 year old female client whose husband is 75 and terminally ill. His benefit far exceeds hers. I encouraged her to file early and get some monthly checks. When her husband dies, she will apply for survivor benefits and get the larger amount. Meanwhile, for however many months between now and his death, a check will appear that can go into savings add an element of financial security. If she had not applied whatever she received prior to his death is gone forever.

Earnings record. This is a chronological history of what you earned during your lifetime to this point. If you change jobs or have no earnings, it's reflected here, fica this applies to the Federal Insurance contribution tax. Act. This is the money withheld from your salary or self employment income that funds the Social Security and Medicare programs. Don't forget that I've already suggested you go to the ssa.gov website and create an account in your name.

You'll discover this as a highly useful step on the website itself is a trove of useful information. In the introduction, I said that back in the day, age 63 was normal. I thought I meant if the average life expectancy was 63, it means that half the people born 63 years earlier had already died. And the other half were now 63. Today, if you reach age 63, your life expectancy isn't an additional 20 years or so. This means that all of you alive 20 years from now are 83 and many of you will live to 93 and beyond.

Billions of dollars are flowing out of the Social Security coffers every year. providing financial security for millions of us. This translates to a legitimate concern about whether Social Security will still be there when you qualify for benefits. I strongly believe it will be, but we'll spend more on that later. If you are an average wage earner, it's estimated you're going to want at least 80% of your pre retirement income in retirement, to sustain your pre retirement standard of living. And that's not taking into account extra money you might be spending the GO GO years.

If we profile Americans today, we discover that 40% of that sustaining monthly income comes from Social Security. To suggest that Social Security is simply icing on the retirement cake is a big mistake. About 52 million Americans receive a monthly retirement benefit for that 40% referenced a moment ago. It's an absolutely critical component of their monthly income when they need to pay their core expenses and support them. standard of living. If Social Security is disrupted, many more millions of Americans will be adversely affected, not just the ones getting monthly checks, if they have no money to spend, what will that do to the economy and to the rest of us?

Figuring out whether to file at age 62 or wait is not easy. Yes, you get the one do over. But there's more to it than that. There's often a huge temptation to get it over with, watch the checks drop into your bank account every month, and then hope for the best. Making a rational decision at age 62 about how much money you'll lead at age 82 is virtually impossible. You may die before you reach age 82 anyway, so there's an incentive to just take the money now and run.

In the next lesson we'll explore this whole issue and how you might work toward a better solution.