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A retirement benefit begins with the primary insurance amount, or PIA, which the Social Security Administration computes from the highest 35 years of wage-indexed earnings averaged into a monthly figure called the AIME. That average passes through a progressive bend-point formula - 90 percent of the first tranche of AIME, 32 percent of the next, and 15 percent of the remainder - so lower earners replace a larger share of prior income than high earners do. The PIA is payable in full only at full retirement age, which is 66 for people born between 1943 and 1954, rises by two months per birth year through 1959, and is 67 for anyone born in 1960 or later. Claiming away from full retirement age applies fixed actuarial adjustments. Early claiming reduces the benefit by 5/9 of 1 percent per month for the first 36 months early and 5/12 of 1 percent for each additional month, so claiming at 62 against an FRA of 67 pays 70 percent of PIA. Delaying past FRA earns delayed retirement credits of 8 percent per year, or 2/3 of 1 percent per month, stopping at age 70; that produces 124 percent of PIA for the 1960-and-later cohort. Break-even against a lifetime of smaller earlier payments typically falls in the late seventies to early eighties. This arithmetic ignores annual cost-of-living adjustments, the retirement earnings test for those still working before FRA, spousal and survivor entitlements, and federal income tax on up to 85 percent of benefits.

The program was created by the Social Security Act, signed by President Franklin D. Roosevelt on August 14, 1935, as a contributory old-age insurance system funded by payroll taxes on workers and employers. Collections began in 1937 and initially paid only one-time lump sums; the 1939 amendments added recurring monthly benefits along with dependent and survivor coverage. Ida May Fuller of Ludlow, Vermont received the first monthly retirement check in January 1940, for 22.54 dollars. Reduced early retirement was extended to women in 1956 and to men in 1961, which is the origin of 62 as the earliest claiming age. The adjustment factors used here come from later legislation. Automatic annual cost-of-living adjustments were enacted in 1972 and first applied in 1975, replacing ad hoc increases voted by Congress. Facing projected trust fund depletion, the National Commission on Social Security Reform chaired by Alan Greenspan reported in January 1983, and the amendments signed that April taxed a portion of benefits for higher-income recipients, accelerated scheduled payroll tax increases, and phased full retirement age from 65 up to 67 for cohorts born from 1938 onward. The same law strengthened delayed retirement credits, which were raised in steps to the current 8 percent per year for people born in 1943 and later.