There's a lot to learn about Social Security, but perhaps the most important thing to know is your full retirement age, or the age at which you qualify to receive 100% of your Social Security benefit. Social Security's full retirement age varies depending on your birth year, but it ranges between age 65 and age 67. Here's what everyone's full retirement age is, and what it means to you.
Full retirement age by birth year
Social Security is designed to provide you with roughly 40% of your pre-retirement income. You qualify for Social Security once you reach 40 retirement credits, which is roughly the equivalent of 10 years of work.
You can claim your Social Security benefits at any point after reaching age 62. However, you only receive 100% of your benefit if you wait to claim until your full retirement age.
Currently, Social Security's full retirement age is 66 and two months for people turning 62 this year. It increases by two months annually until it reaches age 67 for people born in or after 1960.
The following table shows every full retirement age by birth year for easy reference.
|Birth Year||Full Retirement Age|
|1937 or earlier||65|
|1938||65 and 2 months|
|1939||65 and 4 months|
|1940||65 and 6 months|
|1941||65 and 8 months|
|1942||65 and 10 months|
|1955||66 and 2 months|
|1956||66 and 4 months|
|1957||66 and 6 months|
|1958||66 and 8 months|
|1959||66 and 10 months|
|1960 and later||67|
Social Security claiming choices
You can claim benefits earlier or later than your full retirement age, however, the amount you receive in benefits will change. Social Security is designed to pay out the same amount in total lifetime benefits no matter when you claim your benefits, so if you claim earlier than your full retirement age. you'll get a smaller monthly benefit, and if you claim later than full retirement age, you'll get a bigger monthly benefit.
The exact amount that benefits are reduced or increased depends on how many months before or after your full retirement age you file for benefits. The calculation decreases or increases benefits by a fixed percentage for every month you claim early or late, so people with a lower full retirement age will get more in benefits as a percentage of their full retirement benefit if they claim earlier or later than someone with a higher full retirement age.
For example, my full retirement age is 67 and if I claim at age 62, the earliest age at which I can file for Social Security benefits, my benefit will be equivalent to 70% of my full retirement age benefit. If I claim at age 70, the latest year I can delay and still benefit from delayed retirement credits, I'll get the equivalent of 124% of my full retirement benefit. However, if my full retirement age were 66 instead, and I claimed at age 62 or 70, then my benefit would be the equivalent of 75% and 132% of my full retirement age benefit, respectively.
Is it better to claim Social Security at one age or another?
There are pros and cons associated with claiming at different ages, and everyone's decision will be different depending on their retirement goals, health, life expectancy, and their plans for providing for spouses.
Generally speaking, if your retirement dreams include travel, claiming early while you're most physically able to see the world might be the best decision. Similarly, if you're single and in poor health, claiming early might allow you to receive more in lifetime benefits than you might if you wait to file for benefits and die young. Alternatively, if you're healthy and have a long life expectancy, or if you want to make sure your spouse receives the highest monthly payment after your death, delaying might be the best choice.
Financially speaking, determining the best age to claim your benefits is helped by considering the various breakeven points associated with your life expectancy, and the lifetime benefits you could receive if you claim at various ages.
For example, the following chart shows how much I could hypothetically receive in lifetime benefits if I claim at 62, 67, or 70. As you can see, if I live into my late 70s, I'll collect more in lifetime benefits if I claim at age 67 than if I claim at age 62. Similarly, if I live into my early 80s, I'll end up with more in lifetime benefits if I wait until age 70 to claim than I would if I claimed at 67.
Ultimately, breakeven analysis isn't the only thing you should consider when making this important decision, but if all other things are held equal, it can help you decide if you should file for benefits at your full retirement age or not.