Age 62 is the earliest age to claim Social Security. Age 70 is when credits for delaying your benefits stop accruing. There's an important number between those two that you should really be aware of: your full retirement age, or FRA.
Why is FRA important? It's simple. That number could be the difference between reducing your monthly benefit in retirement or enjoying a higher income stream for life.
What does your FRA look like?
Your monthly Social Security benefit is calculated by taking your average monthly wage during your 35 highest-paid years of earnings, adjusting that wage for inflation, and then applying it to a special formula. You're not entitled to collect that benefit in full until you reach FRA.
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The tricky thing about FRA is that it's not a single number. Your FRA hinges on the year you were born. Use this table to determine what that number is:
|
Year of Birth |
Full Retirement Age |
|---|---|
|
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 or later |
67 |
Data source: Social Security Administration.
If you file for Social Security at FRA, you'll get the exact monthly benefit your earnings record entitles you to. If you claim benefits before FRA, they'll be reduced on a permanent basis. The extent of that reduction will depend on how early you file.
One common point of confusion surrounding FRA is that it has no bearing on Medicare. Medicare eligibility begins at age 65, whereas FRA for someone born between 1943 and 1954, for example, is 66. Some seniors sign up for Medicare and Social Security at once, not realizing that in doing so, they're filing for benefits at least a full year early. That's why it's important to use your FRA to decide your benefits-claiming strategy.
Furthermore, knowing your FRA will help you determine whether it pays to work and collect Social Security at the same time. You're allowed to file for benefits while receiving a paycheck, but if you do so before reaching FRA, you risk having some benefits withheld if your earnings exceed a certain threshold. Once you reach FRA, however, working isn't a problem -- you can earn as much as you'd like without impacting your benefits whatsoever.
Delaying benefits past FRA
You may find that by the time FRA rolls around, you don't actually need income from Social Security. Maybe you're still working, or maybe you have a healthy enough retirement savings fund that you're doing just fine without that extra money. If that's the case, you can delay your filing past FRA and boost your benefits by 8% a year up until age 70. That means you have an opportunity to grow your benefits by 24% to 32%, depending on when you're entitled to claim them in full.
Know that number
Of all the things you should know about Social Security going into retirement, your FRA is perhaps the most important. Keep that number in mind and use it to determine your ideal filing age. Knowing when you're entitled to your full monthly benefit will help you make the best decision.
