Q. I turned 62 last year. I've heard that my Social Security benefits will always be 20 percent lower if I take them at 62. But what if I wait until I'm 63 or 64; will I still lose 20 percent?
A. That 20 percent reduction applies only to retirees who start receiving Social Security checks 36 months before their full-retirement age.
Waiting longer to start benefits results in a higher benefit amount. For someone with a full-retirement age of 65, taking benefits at 63 results in a reduction of 13.3 percent. And starting at 64 reduces benefits by 6.7 percent.
Permanently reducing the benefits of  "early" retirees is intended to encourage workers to wait until full-retirement age to start drawing out of the system. Despite the reduction, four of five retirees start their benefits before FRA.
Social Security counts the number of months a retiree will take benefits before full-retirement age. That number is multiplied by a small amount, 0.556. The result is the percentage of reduction.
Age-62 benefits have been 80 percent of full benefits because the difference between age 62 and age 65 is 36 months. And 36 months multiplied by 0.556 percent per month equals a 20 percent reduction.
Use the following formula to reduce benefits that are taken up to 36 months early. "Reduction months" and "RMs" are the number of months a retiree will take benefits before FRA. This formula works because 0.556 percent equals 1/180th.
(full benefit) * (180 - RMs) / 180 = (reduced benefit)
1. Subtract the reduction months from 180.
2. Divide by 180.
3. Multiply that result by the full benefit.
Example 1: Bob was born in 1935. His full-retirement age is 65. If he starts receiving Social Security at age 64 years plus 11 months, he'll get one check before FRA which will reduce his benefit to 99.44 percent of his full amount.
Remember that this reduction is permanent: Reduced benefits don't increase at full-retirement age. Bob's first check will be 99.44 percent. His last check (for the month before his death) will be 99.44 percent.
Example 2: Carol was born in 1938. Her full-retirement age is 65 plus two months. She is eligible for benefits at 62, but she elects to delay for six months. Since she'll draw 32 checks before FRA, her benefit will always be 82.2 percent of her full amount.
Because FRA is increasing and the minimum retirement age is fixed at 62 (see www.ssa.gov/retire/retirechart.htm), many retirees will be taking benefits more than 36 months before FRA. That will result in a reduction of more than 20 percent. Each additional reduction month caused by increasing the FRA will cost retirees 0.417 percent of their benefits.
Use the following formula if the number of reduction months is greater than 36. It's much easier than working with the two different reduction percentages. This formula works because 192/240ths equals 80 percent and 1/240th equals 0.417 percent.
(full benefit) * (192 - RMs + 36) / 240 = (reduced benefit)
1. Subtract the reduction months from 192.
2. Add 36.
3. Divide by 240.
4. Multiply that result by the full benefit.
Example 3: Ted was born in 1938. His full-retirement age is 65 plus two months. If he takes benefits at 62--that's 38 months before his FRA--his benefit will be permanently reduced to 79.17 percent of his full amount.
Example 4: Alice was born in 1953. Her full-retirement age is 66. If she takes Social Security at 62, she'll get 48 checks before FRA. Her permanent reduction will be 25 percent: She'll always get 75 percent of her full amount.