The most popular age to claim Social Security benefits is also the youngest age at which those benefits become available: age 62. However, just because you can claim Social Security benefits at 62 doesn't mean you should.
Before you make the decision to claim Social Security benefits, it's important you know how your benefits will be affected based on how old you are and based on what your full retirement age is.
There's just one problem: 74% of pre-retirees don't know their full retirement age, according to a Fidelity survey. Knowing this number is vital because you could increase or decrease your benefits by thousands of dollars each year if you claim Social Security either before or after your full retirement age.
If you're among the three quarters of Americans who isn't sure what your full retirement age is -- or why it matters -- read on to find out.
Image source: Getty Images.
What's your full retirement age?
Your full retirement age (FRA) is the age at which you become entitled to receive full retirement benefits. If you claim before FRA, benefits will be reduced. If you claim after FRA, benefits will be increased until you reach age 70 at which point there are no further increases.
FRA varies based on when you were born. This table below, from the Social Security Administration, shows FRA by birth year:
| Birth Year | Full Retirement Age |
|---|---|
| 1937 or earlier | 65 |
| 1938 | 65 and 2 months |
| 1939 | 64 and 4 months |
| 1940 | 65 and 6 months |
| 1941 | 65 and 8 months |
| 1942 | 65 and 10 months |
| 1943-1954 | 66 |
| 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 |
Data source: Social Security Administration
Why does full retirement age matter?
Knowing FRA matters because if you retire at full retirement age, you'll receive an unreduced Social Security benefit.
But if you claim Social Security benefits early, the benefit you would have received is reduced by .55 of 1% for each of the first 36-months before FRA and an additional .42 of 1% for each additional month. On the other hand, if you retire late, benefits are increased by .67 of one percent for each month of delayed benefits.
This chart shows what that means for you, assuming you'd have received -- at a full retirement age of 67 -- an average monthly benefit of $1,404, which is the average monthly benefit projected for retirees in 2018.
|
Age |
Change in Benefits Compared to FRA |
Monthly benefit amount |
|---|---|---|
|
62 |
30% reduction |
$983 |
|
63 |
25% reduction |
$1,053 |
|
64 |
20% reduction |
$1,124 |
|
65 |
13.3% reduction |
$1,218 |
|
66 |
6.7% reduction |
$1,310 |
|
67 |
No change |
$1,404 |
|
68 |
8% increase |
$1,516 |
|
69 |
16% increase |
$1,628 |
|
70 |
24% increase |
$1,740 |
Table calculations: author
The cut or increase in your benefits is permanent. If you claim at 62 and receive a 30% reduction in benefits, your benefits do not increase at FRA -- or any time in the future. If you've claimed benefits too early and decide you're unhappy with your reduced benefits, you can't undo what you've done unless you stop payments.
Should you wait to claim benefits until full retirement age?
Because waiting until full retirement age -- or longer -- increases the benefit you receive throughout your entire retirement, it often makes sense to wait to claim benefits. However, by waiting, you miss out on years of receiving Social Security income.
To find out if waiting makes sense for you, you'll need to do a little math. The key calculation:
Lower annual benefit
x Extra years of benefits
/ Difference between higher and lower annual benefit
For example, if you claim benefits at 62 when your monthly benefit is $983, your annual benefits would be $11,796. You'd receive benefits for five extra years compared with waiting until 67, obtaining an extra $58,980.
Since you'd receive $16,848 per month at 67, you'd bring in $5,052 more per year so it would take you 11.67 years to break even. If you lived past 78.6, you'd make up the difference and, for the rest of your life, you'd receive more benefits.
Knowing full retirement age lets you be smart about claiming Social Security benefits
Once you know your full retirement age, you can make smart choices about when to claim Social Security benefits.
Just determine how much you'd receive based on your current age, compare that to what you'd receive if you waited, and decide what makes the most financial sense for you.
