In order to make the right choice about when to start your Social Security benefits, you need to know what the Social Security Administration considers to be your full retirement age (FRA).
Unfortunately, the vast majority of U.S. adults has no clue when that is. This means they're at serious risk of getting less monthly and lifetime income from one of the country's most important government programs.
You can't afford to pass up retirement benefits just because you're lacking this basic insight, so make it a point to join the minority of Americans well versed in what FRA is and why it matters.
Millions of Americans are in the dark about their full retirement age
According to a recent survey conducted by Nationwide, just 16% of U.S. adults are aware of what their full retirement age is. With 258.3 million adults in the U.S. according to recent Census Data, this means close to 217 million adults are completely in the dark about this important number.
So what is FRA exactly? It's the age at which a retiree must get their first Social Security check in order to get their standard benefit. The standard benefit is formally referred to as the primary insurance amount (PIA). It's calculated by a formula that involves adjusting average wages for inflation, determining your monthly average wage in the 35 years your earnings were highest, and giving you benefits equaling a specific percentage of that monthly average.
Traditionally, every retiree hit this milestone at age 65 and got their PIA if they began receiving retirement checks at that time. But thanks to amendments to the law in 1983, FRA has been gradually shifted later and it now depends on birth year. Here's when yours is, based on when you were born:
- It's 67 if you were born in 1960 or later.
- It's 66 and 10 months if you were born in 1959.
- It's 66 and 8 months if you were born in 1958.
- It's 66 and 6 months if you were born in 1957.
- It's 66 and 4 months if you were born in 1956.
If you want to receive your standard benefit as determined by what you earned -- and paid into the system -- during your life, you must file for checks to begin exactly at that age. That's why it's such a problem that so many people have no clue when the right time for them to get their first Social Security payment is.
Why does full retirement age matter so much?
So what happens if you don't know what your FRA is? In many cases, you could end up making a choice to claim your Social Security checks at a suboptimal time.
You do not have to start getting retirement income at exactly your FRA. You have the option to start checks at young as 62, which could be as much as five years before it. If you're even a month ahead on getting your first Social Security payment, though, early filing penalties reduce the amount of your checks. This reduction lasts for life, and the earlier you claim benefits, the bigger it is.
You also have the option of delaying past FRA. It may seem odd to wait beyond the time you become eligible for your standard benefit, but doing so can pay off thanks to delayed retirement credits. These increase your monthly payment for each month beyond FRA that you put off getting your first Social Security check. These credits can substantially increase your standard benefit, raising it by two-thirds of 1% per month or 8% per year until age 70.
If you don't know your FRA, you can't decide whether an early claim for a smaller benefit is a better bet or whether a delayed claim and a larger monthly check is right for you.
You owe it to yourself to optimize your Social Security income since this is likely the only guaranteed source of retirement funds you'll have that will definitely last for life. So make sure you learn the details about when your full retirement age is before you even consider requesting your first check.