Saving for retirement is tough, and many older adults end up relying heavily on Social Security to make ends meet in retirement. While that's not necessarily a bad thing, it's important to understand how the program works to maximize your benefits.
One of the most crucial factors affecting your benefit amount is your full retirement age(FRA). However, only 16% of adults know their exact FRA, according to a 2021 survey from the Nationwide Retirement Institute.
Knowing your FRA can result in better Social Security decisions and even help you receive a higher payout each month. Here's how.
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What is your FRA?
Your FRA is the age at which you'll receive the full benefit amount you're entitled to, based on your earnings history. Your exact FRA will depend on the year in which you were born, but everyone's will fall between ages 66 and 67.
| Year You Were Born | Your 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 |
Source: Social Security Administration. Chart by author.
You don't have to wait until your FRA to file for Social Security, but if you claim early, you'll receive a reduced benefit amount. If your FRA is 67 years old, for instance, but you file as early as possible at age 62, your payments will be reduced by 30%.
It's also possible to delay benefits past your FRA. If you wait until age 70 to file, you'll receive your full benefit amount, plus a bonus of up to 32% each month. You can delay beyond age 70, but you won't receive any additional benefits for doing so.
Keep in mind, too, that once you file, these benefit adjustments are usually permanent. If you claim early, then, be prepared to receive smaller checks for the rest of your life. And if you delay benefits, you'll collect larger payments forever -- regardless of how long you live.
Why your FRA matters
There's not necessarily a "right" time to file for Social Security. Some people will be better off claiming as early as possible, while others may choose to wait. Knowing your FRA, though, can help you better prepare.
Most adults believe their FRA is lower than it actually is. In fact, the average baby boomer believes their FRA is age 64, according to the Nationwide survey.
If you head into retirement assuming your FRA is 64, for example, you might begin claiming at that age expecting your full benefit amount. In reality, though, you're claiming early, and your monthly payments will be permanently reduced.
Similarly, you may file at age 67 thinking you're delaying benefits, but that might actually be your FRA. If you're expecting a higher payment for delaying, you could be in for a surprise when you don't receive a bonus.
Social Security benefits can seem complex and confusing, but it pays to at least understand the basics. When you know your FRA, it will be easier to plan for when you'll claim, and you can head into retirement as prepared as possible.
