When you're planning for retirement, it's important to understand how Social Security will work. In particular, you need to know when your full retirement age (FRA) is.
Understanding your FRA will enable you to make a fully informed choice about the right age to begin your Social Security checks and maximize the chances of a financially secure retirement.
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What is your full retirement age?
Your full retirement age is designated by law. If you claim your first Social Security check at exactly your full retirement age, you will receive your "primary insurance amount" (PIA).
Your primary insurance amount is essentially your standard benefit. It's the amount of money you get under Social Security's benefits formula based on average wages over the 35 years you earned the most money (after adjusting for wage growth). If you want to receive exactly this amount of retirement benefits, the table below shows when your full retirement age is. You must start checks when you reach that age.
| Birth Year | 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 |
Table source: Social Security Administration.
Knowing when your FRA is can be very important since you do not have to claim benefits at this designated age. You can claim them beginning at 62, or you can wait until after your FRA. But doing so will affect the income Social Security provides to you.
Here's why you need to know your FRA
You need to know when your FRA is because you may decide to claim benefits ahead of that age, or because you may want to wait until you've already passed it. But you shouldn't make that decision until you understand how your current age, relative to FRA, will affect the income you get.
See, if you claim your Social Security checks before FRA, you're hit with the following penalties:
- A benefits reduction of 5/9 of 1% per month for the first 36 months you get a check prior to FRA
- A benefits reduction of 5/12 of 1% per month for any month before then
If you have a FRA of 67, you have the opportunity to claim Social Security up to five years ahead of that schedule by starting checks as soon as you reach the age of eligibility at 62. Doing so would reduce monthly benefits by 30%, though, compared to your standard benefit. You don't want to take such a big cut without knowing that's happening and making sure you're OK with the trade-off of getting smaller benefits but more checks over time.
On the other hand, if you claim benefits after FRA, you are rewarded with delayed filing credits until age 70. These raise your benefits by 2/3 of 1% every month you wait. So your benefits could increase by up to 24% if you have a FRA of 67 and don't get your first Social Security check until 70.
The effect of an early or late claim can be profound. If you'd have been eligible for $2,000 at a FRA of 67, you'd get just $1,400 per month if you claimed benefits at 62. If you waited until 70, you'd get $2,480. That's a difference of $1,080 per month!
Before you make your Social Security claim, check what your FRA is, see what your benefits are at different ages you're considering claiming, and really think through whether you are happy with your choice to file now or whether you'd rather wait to supersize your retirement checks.
