Social Security rules that affect benefit amounts

Note: These rules don't apply to disability benefits.

Full retirement age.The amount of benefits a person receives depends on whether the benefits are first claimed before, at, or after what's called full retirement age:

• For people born in 1937 or earlier, it's age 65.

• For those born between 1938 and 1942, it's an additional two months after the 65th birthday for each year after 1937.
• For those born between 1943 and 1954, it's age 66.

Early benefit claim.Retirement and dependents benefits may be claimed as early as age 62, survivor's benefits as early age 60. But the benefit amount is permanently reduced by a bit more than 0.5 percent for each month it's claimed before full retirement age. If someone has a long life expectancy, this permanent reduction can mean a loss of tens of thousands of dollars in benefits over a lifetime.

Earnings limit for early claims. If a person continues working before reaching full retirement age, an early claim might involve a penalty. Until full retirement age, Social Security reduces benefits by $1 for every $2 earned over a set yearly limit. As of 2012, the limit is $14,640. This applies only to income earned from current work, not from pensions, investments, or the like.

Delayed benefits. If a person delays claiming benefits until after full retirement age, those benefits would be permanently 4 to 8 percent higher for each year's delay, up to age 70 (after which there's no more increase). If someone doesn't need the income immediately, this delay can be a solid investment, particularly if the person has a long life expectancy.