If you qualify for Social Security retirement benefits, which nearly all American workers do, you can choose to start collecting them as early as age 62 or as late as age 70 -- or anywhere in between. The age at which you claim Social Security will be used to determine how much money you receive each month initially, so it's an important financial decision.
In this article, we'll discuss the concept of full retirement age, what happens if you claim Social Security earlier or later than your full retirement age, and other important information you need to know about when you should claim Social Security and what it means to you.
What is your full retirement age?
Your Social Security retirement benefit is determined by a formula based on your earnings throughout your career. But this formula is only used to determine a number called your primary insurance amount, or PIA. This is the amount you can expect to get if you claim benefits at your full retirement age.
Many Americans mistakenly believe full retirement age is 65, and to be fair, it once was. But your full retirement age for Social Security purposes depends on when you were born and ranges from 66 to 67. Here's a quick guide:
Year You Were Born
Your Full Retirement Age
1954 or earlier
66 years, 2 months
66 years, 4 months
66 years, 6 months
66 years, 8 months
66 years, 10 months
1960 or later
What if you claim Social Security at any other age?
To be sure, very few people actually claim Social Security at their exact full retirement age. In fact, the two most common ages for claiming Social Security are 62 (as early as possible) and 65 (Medicare eligibility).
However, the full retirement age is still an important concept to know, because it determines if your benefit will be adjusted up or down when you claim it. The Social Security Administration has three age related guidelines:
- If you claim early, your benefit will be permanently reduced by 6.67% for each year you claim early, for as many as three years before reaching full retirement age.
- If you claim more than three years before your full retirement age, your benefit will be reduced at a rate of 5% per year beyond three years, until as early as age 62.
- If you claim after your full retirement age, your benefit will be permanently increased by 8% for every year you wait from your PIA, until as late as age 70. And it's important to mention that all three of these rules are prorated monthly -- in other words, if you even wait one or two months after FRA to claim, it will have a positive impact on your benefit.
Here's how this works. Let's say that based on your work history, your PIA is $2,000 per month. So, this is how much you would get if you claimed at exactly full retirement age. We'll also say for simplicity's sake that your full retirement age is 67.
If you claim at 62 (five years early), your benefit would be reduced by 6.67% for each of the first three years early and 5% for the other two, for a total reduction of 30%. Your $2,000 monthly benefit would be adjusted to $1,400.
If you claim at 70 (three years late), your benefit would be increased by 8% for each of the three years you chose to wait, for a total increase of 24%. Your $2,000 PIA would become $2,400 per month by the time you start getting checks.
When should you fill out the application?
You can apply for benefits (which you can easily do online) up to four months before you want your Social Security benefits to start. As an example, if you want your benefits to start in January 2023, you can apply as early as September 2022. And it's a good idea to apply as early as possible once you know when you want to claim benefits, in order to avoid any delays.
It's also important to keep in mind that Social Security benefits are paid a month in arrears. In other words, you won't get your January Social Security payment until February. So, keep this in mind for budgeting purposes.
When should you claim Social Security?
Every situation is different. For some people it can make excellent financial sense to claim at 62, and others are best served by waiting as long as they can. One thing to keep in mind is that unless you have a pension plan, Social Security is likely to be the only inflation-protected, guaranteed income stream you'll have in retirement. While it doesn't always make sense to wait, keep this in mind when deciding what is best for you.