Social Security may end up becoming your most important source of retirement income. You might kick off your senior years with plenty of savings in an IRA or 401(k), only to see your nest egg gradually dwindle to the point where it's depleted.
Social Security, on the other hand, is designed to pay you a monthly benefit for life. So it's important to claim Social Security carefully since your filing age will dictate how much monthly income you're able to set yourself up for.
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Before you file for Social Security, there's one key number that's essential to know. And if you don't commit it to memory, you might botch your filing decision and regret it for years to come.
You must know your full retirement age
Full retirement age, or FRA, is the age at which you're entitled to your full monthly Social Security benefit, based on your personal wage history. You can use the following table to determine your FRA, based on your year of birth:
|
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.
Why is FRA important? It's simple. You're allowed to sign up for Social Security as early as age 62 and can delay your filing past FRA for a boosted monthly benefit until age 70. But if you don't know your FRA, you won't be able to work through those options armed with knowledge.
Let's say you're inclined to file for Social Security at 62 to get your money sooner. You may be under the impression that your FRA is 65, so you'll be claiming benefits three years early by doing so at 62. Once you realize you're actually signing up for Social Security five years early, that might change your mind, due to the larger hit to your benefits
Similarly, you may like the idea of delaying your Social Security filing for a permanent boost to your monthly benefits. But if you don't know your FRA, you won't be able to calculate the full financial benefit of your delayed claim.
The rules can change
As of now, FRA is 67 for anyone born in 1960 or later. But lawmakers have been toying with the idea of pushing FRA back to a later age -- such as 68 or 69 -- to help address some of the financial issues Social Security is facing.
As of now, those plans are by no means official. But you'll want to keep tabs on Social Security if you're not all that close to FRA at this point to see if anything changes.
Social Security has made changes to FRA in the past, and lawmakers probably won't hesitate to do so again if that's needed to shore up the program's finances. The good news is that lawmakers are unlikely to announce such a drastic change without ample notice. So if adjustments to FRA come down the pike, you'll hopefully get a nice heads-up in case you need to adjust your Social Security filing plans accordingly.
