Here is a list of the most common Social Security terms. These terms can be confusing, but understanding them will help you determine what is the optimum claiming strategy for you.
- Primary Insurance Amount (PIA): An amount equal to your Social Security benefit at full retirement age. The PIA is the basis used to compute benefits that may go to you or your family members. It’s based on a progressive formula applied to the average indexed monthly earnings.
- Full Retirement Age (FRA): The age at which you qualify for full (or unreduced) retirement benefits. The full retirement age is based on your year of birth and is gradually rising to 67 for individuals born in 1960 or later. Also known as normal retirement age.
- Average Indexed Monthly Earnings (AIME): The dollar amount used to calculate your Social Security benefit. AIME is based on the HIGHEST earnings for 35 years that have been indexed for wage growth and averaged.
- Delayed Retirement Credits (DRCs): Social Security benefits are increased by a certain percentage (depending on your date of birth) if you delay claiming retirement benefits until after you reach full retirement age. Delayed retirement credits are awarded up to age 70.
- Annual Earnings Test: Required withholding of benefits if earnings exceed certain limits and you have not reached full retirement age.
- Windfall Elimination Provision (WEP): A provision that may reduce Social Security retirement benefits for individuals who earned pensions through government work not covered by Social Security. This provision reduces Social Security benefits for many older government workers who were under the Civil Service Retirement System.
- Government Pension Offset (GPO): A provision that reduces Social Security spousal and widow/widower’s benefits, if they’re based on the earnings record of a worker who spent part of his or her career in government employment not covered by Social Security.