The Most Confusing Thing About Social Security

Find out what most people have the most trouble understanding about their benefits.

Dan Caplinger
Dan Caplinger
Sep 10, 2018 at 6:02AM
Investment Planning

Social Security plays a vital role in your retirement planning. With the potential to receive hundreds of thousands of dollars in Social Security payments throughout your golden years, it's essential to make smart decisions based on all the facts that are available to you. Yet several aspects of Social Security are confusing to people, and that can lead them to make decisions that aren't as good as they'd be if they fully understood their options.

Recently, a survey from a major life insurance company examined what people know and don't know about their Social Security benefits. One of the most confusing questions for many of those who responded to the survey involved the effect that full retirement age has on what you get from Social Security. The fact that full retirement age doesn't mean the same thing for Social Security as it does in the minds of most retirees and near-retirees contributes a great deal to the confusion surrounding the provisions.

Cake with lit candles in the shape of the numbers 6 and 5 on top.

Think 65 is the magic age for Social Security? Think again. Image source: Getty Images.

What is the full retirement age?

When Social Security was first created, the key age for receiving benefits was 65. In most people's minds, that makes complete sense, because 65 has long been the socially accepted age at which many people consider retirement. A number of professions, such as pilots in the airline industry, have mandatory retirement dates that are tied to a 65th birthday. Moreover, Americans become eligible for Medicare benefits at age 65, further reinforcing the idea that 65 is the magic age for retirement.

However, Social Security began looking at changing its full retirement age in the early 1980s. In response to the first round of potential financial problems for the program, lawmakers arranged to have the retirement age rise slowly from 65 to 67, with delayed implementation that wouldn't affect current retirees.

As a result, when your full retirement age is depends on your year of birth. Here's a simple chart to look up what your full retirement age is:

If You Were Born In

Then Your Full Retirement Age Is

1937 or earlier



65 and 2 months


65 and 4 months


65 and 6 months


65 and 8 months


65 and 10 months

1943 to 1954



66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

1960 or later


Data source: Social Security Administration.

Why does my full retirement age matter?

The confusing thing about full retirement age is that it isn't necessarily obvious what difference it makes. After all, no matter what your full retirement age is, you can still claim early benefits starting on your 62nd birthday.

What's different, though, is how much in benefits you'll get. The formula that determines how much your benefit will be uses full retirement age as a baseline. For every month younger than your full retirement age that you claim benefits, you'll suffer a reduction in the size of your monthly benefit. For instance, for someone whose full retirement age is 66, a monthly benefit claimed at age 62 will be 25% less than what they'd get if they waited until 66 to take Social Security.

And here's the confusing part: The older your full retirement age is, the bigger the penalty will be for claiming early. For example, if your full retirement age is 67, claiming at age 62 incurs a 30% penalty rather than the 25% penalty from the previous example above. You'd have to wait until age 63 to claim in order to limit the reduction to just 25%.

Some policymakers have talked about potentially increasing full retirement ages again, with some targeting 69 or 70 as a final endpoint. What's important to understand is that these moves are basically benefit cuts for future retirees, as you'll have to wait longer to get the same benefit or take a bigger pay cut by claiming when you would have originally wanted to start receiving Social Security.

Don't get confused

There are a lot of moving parts with Social Security, and keeping track of seemingly esoteric aspects like full retirement age can be difficult. But by understanding the bottom line of how such issues can cost you money, you'll be better prepared to make smart decisions about your benefits -- and to keep your elected representatives accountable for the legislation they propose to deal with Social Security's challenges.