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2 Ways You Can Lose Money by Not Knowing Your Social Security Retirement Age

By Christy Bieber - Oct 17, 2021 at 6:03PM

Key Points

  • Social Security is an important retirement income source.
  • You need to claim benefits at a specific age to get your standard benefit.
  • Claiming early can reduce benefits, and some benefits could potentially be forfeited if you work.

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Don't miss out on benefits that could help you provide for yourself in your later years.

Did you know Social Security has designated a specific age for when you are able to receive your standard benefit amount? This specific age is called your full retirement age (FRA). Depending on when you were born, FRA is between age 66 and 2 months and 67.

Unfortunately, if you don't know what your FRA is, you could end up losing money you would otherwise be able to rely on as a retiree. Here are two possible ways this could happen. 

Two people sitting at table with laptop and papers.

Image source: Getty Images.

1. You could claim benefits at the wrong time

Claiming at FRA: Knowing your full retirement age allows you to get your primary insurance amount. Your primary insurance amount is a monthly benefit calculated based on your inflation-adjusted earnings from the 35 years you made the most money.

Claiming before FRA: You don't have to claim retirement benefits right at FRA, though. Some retirees decide it makes more financial sense to start their benefits earlier. Checks can be started as early as 62. However, a reduction in benefits applies to early claimers, with benefits shrinking for each month you file before FRA.

Claiming after FRA: Other retirees may feel it's better to wait until after full retirement age. This can be a financially advantageous decision because late filers receive an increase in benefits, with benefits increasing each month you delay until age 70. 

If you know when your FRA is, you can understand whether your choice to claim benefits at a particular time will result in getting your standard benefit, a reduced benefit, or an increased benefit. With this knowledge, you can decide if you'd rather get smaller checks sooner or larger checks later.

You can also calculate how much you'd get at each different claiming age, how long it would take you to break even for a delayed claim, and see which decision feels like the best one given your health and family goals. 

2. You could unknowingly forfeit checks by earning too much

There's another key reason you need to know what your full retirement age is. If you claim benefits before you reach your FRA, and then decide to go back to work, you may find that some of your monthly Social Security checks never come.

That's because early filers are allowed to earn only up to a set amount of money before their benefit checks are reduced. If you don't know when your FRA is and you start earning a paycheck, it may come as a financial shock to find you forfeit your benefits and don't have as much income as expected. 

If you miss out on Social Security checks because you work before FRA and earn too much, the money from those forfeited checks isn't gone forever. Your benefit amount is recalculated at FRA based on the months you didn't get payments and your monthly benefit grows slightly as a result. But the increase is a small one, and it takes time to make up for missed checks. 

You don't want to be surprised by not getting income you expect, nor do you want to make a Social Security claim without understanding how your age at the time of filing affects benefits. So, before you even consider starting your retirement benefits, be sure you know what your full retirement age is and what it means for your Social Security income.

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