If you're thinking about retiring in 2022, you'll need to ensure you understand the rules for claiming Social Security benefits.
Specifically, it's important to make certain you're aware of how your age when you get your first check affects your monthly income -- as well as why delaying your claim could be the most beneficial choice.
Putting off claiming benefits, at least for a little bit of extra time, could be even more important for future retirees looking for a higher monthly income than it was for seniors in the past. Here's why.
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Why delaying Social Security benefits makes more sense than ever
If you're retiring this year or in future years, there's a simple reason why you may want to wait to start your Social Security benefits: Full retirement age (FRA) is moving later.
FRA is when you'll receive your "primary insurance amount." That's the standard benefit you're entitled to. It equals a percentage of average wages over the course of your 35 highest-earning years (after adjusting wages for inflation).
The date of your FRA plays a major role in the amount of total benefits you end up with each month. That's because if you don't claim at exactly your full retirement age, you'll either see your benefits reduced by early filing penalties or increased by delayed retirement credits.
Since FRA is changing in 2022, choosing not to delay the start of your claim for benefits for at least a little bit of time compared to when past retirees claimed could mean that you either get hit with more early filing penalties or you earn fewer delayed retirement credits.
In other words, if you want to make sure you don't inadvertently shrink the benefit amount available to you, you're going to have to put off your claim because of the change to FRA.
How is FRA changing in 2022?
Full retirement age is based on birth year. The table below shows when your FRA is, based on when you were born.
|
Birth Year |
Full Retirement Age |
|---|---|
|
1943-1954 |
66 |
|
1955 |
66 and two months |
|
1956 |
66 and four months |
|
1957 |
66 and six months |
|
1958 |
66 and eight months |
|
1959 |
66 and 10 months |
|
1960 and later |
67 |
Data source: Social Security Administration.
As you can see, anyone who didn't turn 62 in 2021 or earlier is going to have a later FRA. Those future retirees now have to wait until 67 years old to get their first check to avoid any early filing penalties. And they'll need to wait beyond 62 to boost their monthly checks with delayed retirement credits.
And anyone who hadn't already FRA by 2021 will also be affected by the change to FRA. Those who are finally turning 66 in 2022, for example, are going to need to wait until 66 and four months to avoid early filing penalties, while retirees who turned 66 least year only had to wait until 66 and two months.
Don't claim Social Security benefits too soon
Early filing penalties permanently reduce your monthly check amount by 5/9th of 1% for each of the first 36 months you start benefits before FRA and by an additional 5/12th of 1% for any prior month.
Although each monthly penalty isn't huge, shrinking your checks does have lifelong financial consequences, since you'll never catch back up to the higher income that would've come from waiting.
So before you claim your benefits this year, make sure you understand that FRA has changed and that delaying a bit longer may be necessary to get your full Social Security benefit or to earn the delayed retirement credits that can leave you with more money to spend.
