You can find many numbers, charts, and tables with Social Security information. In fact, some would argue that there are too many, sometimes causing more confusion with information overload. It doesn't help that this information seems to change often, either.
With all the information relevant to Social Security, one table reigns supreme. Here's the most important Social Security chart you'll see.
Image source: The Motley Fool.
How the timing of your claim affects your benefits
This chart is significant because your full retirement age (FRA) dictates a lot in Social Security. Arguably the most important thing it dictates is the value of your monthly benefits based on when you claim relative to your FRA.
Your FRA determines when you're eligible for your full monthly benefit, or primary insurance amount (PIA). However, that's not when you have to claim it. You can claim benefits as early as 62 or delay them until you reach 70.
Claiming benefits early will reduce them by 5/9 of 1% for each month within 36 months of your FRA. Beyond that point, each month will see a reduction of 5/12 of 1%. For example, someone born after 1960 who signs up at 62 would receive a monthly benefit 30% below their PIA.
For those born in 1943 or later, delaying benefits past your FRA will increase them by 2/3 of 1% each month. This works out to an 8% annual bump on top of your PIA until you reach 70.
Using your FRA to find your break-even age
Your FRA is also important because you can use it to find your break-even age, which is the age when the total amount received from claiming benefits at your FRA (or early) equals the amount received by delaying them.
As an example, let's assume someone's FRA is 67, and their monthly benefit is $1,800. This means delaying their benefits until 70 will increase the monthly payout to $2,232.
By age 82, they would've received $324,000 in total benefits by claiming at age 67 (180 months * $1,800). Their total benefits at 82 would only be $321,408 if they claimed at 70 (144 months * $2,232). Fast forward one year, and the total benefits from claiming at 67 and 70 would be $345,600 and $348,192, respectively.
In this case, someone's break-even age would be 82.5, so any benefits received after that will make the total from delaying until 70 greater than taking them at your FRA.
When you claim Social Security isn't a straightforward decision
Your FRA should be a key part of your decision regarding when to claim Social Security, but it should only be one piece of the puzzle. Use it to get an idea of your monthly benefit at certain claiming ages and find your break-even age, but don't let that be the deciding factor.
Consider health (both personal and family history), immediate financial needs, and other retirement income sources (like a 401(k) or IRA). Retirement accounts lower than preferred? Maybe claiming early works in your favor. Got enough investment income to cover your expenses? Maybe delaying benefits is the right move.
It's all about your personal situation. Someone can give Social Security advice until their face is blue, but no two people's situations are exactly the same. You want to make Social Security claiming decisions that are right for you.
