Monthly benefit with DRC [Soc Sec:Delayed Retirement Credit]

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Monthly benefit with DRC [Soc Sec:Delayed Retirement Credit]

Postby BBSinger » Fri May 10, 2013 12:41 pm

Assume I have a PIA of 1000 per month, my FRA is 66 and I take my benefit at 63.

This would reduce my benefit by 20% to 800 per month.

I then suspend benefits at 66 for two years earning 24 months of DRC which equates to a 16 percent increase.

I assume my new monthly benefit would be (1000*.8) + (1000*.16) this would be 800 + 160 = total of 960.

In other words my DRC additive would not be reduced because I took my RIB early.

Thank you.

Bob
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Re: Monthly benefit with DRC [Soc Sec:Delayed Retirement Cre

Postby ThePrune » Fri May 10, 2013 2:04 pm

BBSinger wrote:I assume my new monthly benefit would be (1000*.8) + (1000*.16) this would be 800 + 160 = total of 960.

I beleive that the final benefit you are suggesting is incorrect.

Social Security POMS RS 00615.692 Amount of Credit, subsection A.POLICY states that Delayed Retirement Credits (DRCs) are added to the PIA or the permanently reduced Retirement Insurance Benefit (RIB). Since your example involves starting monthly benefit amounts (MBAs) before FRA, you have a situation in which the DRCs are applied to the reduced RIB.

RS 00615.692 Amount of Credit, subsection B.PROCEDURE supplies the formula to be used:
B.PROCEDURE wrote:To add DRCs use the formula below:
MBA times # of DRCs times .01 times fraction = credit

The monthly DRC fraction for people born after 1942 is 2/3%. (See the table in subsection C.CHART.) So the monthly credit you will earn for the 24 months of DRCs is:
[$1000 x 0.80] x 24 x 0.01 x (2/3) = $128.

Thus your NEW Monthly Benefit Amount (ignoring inflation adjustments) should be $800 + $128 = $928.
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Re: Monthly benefit with DRC [Soc Sec:Delayed Retirement Cre

Postby BBSinger » Mon May 13, 2013 12:50 pm

Thanks for the reply. This is the point that I was confused on.

Is the DRC a percentage of the PIA, then added to the reduced RIB or is the DRC a percentage of the reduced RIB.

You appear to think it is the latter, I was not sure, thanks for the reply.

Bob
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