Fact vs. Fiction
Financial Tips
Test Your Knowledge of Social Security Terms
(Updated: 06/03/2019)
There are a variety of terms unique to social security benefits. Having a solid grasp of these terms will help you understand the potential social security benefits that may apply to you or a family member.
All of the following are true statements about social security benefits, except:
- Social security credits (i.e., quarters of coverage) are earned when you are employed and pay social security taxes. A full year of employment can provide up to 4 credits. Generally, 40 credits are required to meet the qualifications for social security retirement benefits.
- Full retirement age (FRA) is 65 and is the age at which everyone is eligible to claim full social security benefits.
- Average indexed monthly earnings (AIME) are calculated by the Social Security Administration (SSA). The SSA adjusts (indexes) employment earnings and includes up to your highest 35 years of earnings in a formula to calculate the AIME. This amount is then included in the calculations to determine your primary insurance amount (PIA).
- Primary insurance amount (PIA) is the amount of retirement benefit you will receive when you file for retirement benefits at your FRA. This amount is calculated based upon a formula and factors in the AIME.
Although FRA is defined as full retirement age, your actual FRA will vary depending on your year of birth. To find your FRA, refer to the table below. Keep in mind that social security benefits claimed prior to your FRA may be reduced.
Here are some other common social security terms for reference.
- Delayed retirement credits: If you delay retirement benefits past your FRA, social security benefits may increase up to an additional 8 percent per year until you reach age 70.
- Full retirement age (FRA): This is the age you are eligible to claim full social security benefits, which varies depending on your date of birth. Another term for this is normal retirement age.
- Social Security Administration (SSA): The SSA is the government agency that coordinates and distributes social security benefits.
- Social security disability insurance (SSDI): This program provides benefits to a person who is unable to work for a year or more, meets a social security definition of disabled, and has sufficient work history based upon age to qualify.
For additional information on social security benefits, please visit https://www.ssa.gov. For a glossary of terms, visit https://www.ssa.gov/agency/glossary/.
Fact vs. Fiction
We understand that it can be tricky navigating the world of personal finance. Everyone seems to have an opinion, and it can be hard to know what to believe. We created this series as a way to present and debunk some of the most common financial myths.
Fiction: The cost of Medicare is the same for everyone.
Fact: The premium cost for Medicare (except for Part A) is means tested. When you first enroll, your modified adjusted gross income (MAGI) from two years prior to enrollment will determine your premium cost. If you were to enroll in 2019, your premiums would be based on your 2017 MAGI. There is a standard premium cost and, where applicable, an income-related monthly adjustment amount. Your cost is evaluated annually, so it may change from year to year based on your referenced MAGI.